Fast Track Quick Revision INCOME TAX Track Quick Revision INCOME TAX ... 234A, B & C 10 minutes 37 19 Return of Income 139A to 140A ... Income Tax Rules. THAR DUCT

Fast Track Quick Revision

INCOME TAX

AY 2016-17

www.CaCwaCs.com

Chapter Sections Revision Time Page

1

Basic Concepts 1 to 4 10 minutes 1

• Slab Rate

• Which finance act is applicable for my exam• How to memorise income tax sections

• Constitution of India & Income tax• How to subtract 2 dates in your mind

3 Income from Salaries 15 to 17 40 minutes 4 to 8

4 Income from House

5 Depreciation 32 & 50 15 minutes 12

6 Profits & Gains from Business or Profession 28 to 44D 50 minutes 13 to 16

7 Capital Gains 45 to 55A 25 minutes 17 to 19

8 Income from Other Sources 56 to 59 10 minutes 20 & 21

9 Clubbing of Income 60 to 65 10 minutes 22 & 23

10 Set off & Carry forward of losses 70 to 80 15 minutes 24 & 25

11 Deductions from Gross Total Income 80C to 80U 25 minutes 26 to 28

12 Rates of Tax 15 minutes 29

13 Agricultural Income 2(1A) & 10(1) 15 minutes 30

14 Assessment of firm 184 10 minutes 31

15 Assessment of charitable trusts 11 to 13A 15 minutes 32

16 Tax deducted at Source 190 to 197 25 minutes 33 to 35

17 Advance Tax 207 to 211 10 minutes 36

18 Interest payable by assessee

234A, B & C 10 minutes 37

19 Return of Income 139A to 140A 20 minutes 38 & 39

20 Revise entire income tax 15 minutes 40

21 Mixed Topics 35 minutes 41 to 43

• Making of Law

Residential Status 5 to 9 20 minutes 2 & 3

22 to 27 20 minutes 9 to 11Property

1Basic Concepts

Section 1 to 4

Never Say Die

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Concept of IncomeRevenue receipt

Every revenue receipt is derived from source of income. Source of income can be a tangible asset or intangible assets.

Capital receipt

1. Receipt for which there do not exist a source of income is a capital receipt.

2. Sale of source of income. Tax treatment

Every revenue receipt is taxable, unless otherwise expressly exempted under the Act.

Tax treatment

Every capital receipt is not taxable unless otherwise expressly taxable.

Revenue expenditure

Expenditure incurred for maintenance of source of income.

Capital expenditure

Expenditure incurred for acquisition of source of income.

DefinitionsS 2(9) Assessment

Yearmeans the period of 12 months commencing on the 1st day of April every year. (AY = FY in which tax is paid)

S 3 Previous year

means the financial year immediately preceding the assessment year.(PY = FY in which income is earned)

Exceptions to PYIncome of the PY tax-able in the PY itself instead of AY

S 172 Income of a Non-Resident shipping companies.S 174 Income of persons leaving India with no intention of returning to India.S 174A

Assessment of AOP / BOI / AJP formed for a particular purpose likely to be dissolved in the same year of formation.

S 175 The assessee is likely to transfer his assets with a view to avoid payment of tax.

S 176 Income of a discontinued business or profession.

S 2(31) Person includes Individual; HUF; Company; Firm; AOP (Society); Local Authority; AJP (University)

S 2(7) Assessee Person who pays tax, interest or penalty, Any proceeding undertaken; a deemed assessee; a person who is in default.

S 2(24) Income includes salary, rent, profit, dividend, gifts, donations, capital gain.

Assessment year Previous yearAssessment year is the financial year in which tax is paid.

Previous year is the financial year in which income is earned.

Assessment year succeeds previous year. Previous year precedes assessment year.Assessment year always starts from 1st of April and ends on 31st of March.

All previous year whether first or subsequent shall always end on 31st of March. However start of first previous year shall depend upon the existence of source of income.

The period of assessment year is fixed 12 months.

The period of previous year is of maximum of 12 months. It can exist even for a day if the source of income newly coming into existence, in the said financial year, i.e. on 31st March.

Page 1 of 44

2Residential Status

Section 5 to 9

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Section 6 : Determination of Residential Status(1) (2) (3) (4) (5) (6)Ind HUF, Firm, AOP/BOI Company Local Auth. / AJP Ind / HUF

Basic Condition Additional conditionSatisfies Do not satisfiy x Satisfies Do not satisfyResident Non Resident R-OR R-NOR

S 6(1) & 6(6). Determination of Residential Status of Individual.S 6(1) Basic ConditionIf an Individual is present in India(a) for period or periods of atleast 182 days in the

relevant PY; or

}Satisfies any one basic condition

Resident in India.

(b) for atleast 60 days in the relevant PY & atleast 365 days in last 4 years immediately preceding the relevant PY.

Do not satisfies any basic condition

Non Resident in India.

Exceptions-check only 182 days(a) If an Indian Citizen leaves India for the purpose of employment or leaves India as a crew

member of Indian Ship.(b) If an Indian Citizen or Person of Indian Origin comes to India on a visit from outside India.

As per explanation to S 115C(e) A Person is said to be of Indian Origin if he himself or his Parents / Grandparents are borne in undivided India. Check date of birth should be before 15-8-1947 and place of birth is in India, Pakistan or Bangladesh.

S 6(6) Additional Condition(a) Resident in India for atleast 2 years in last 10 years

immediately preceding the relevant PY; and } If satisfies both the Additional Condition then RS is R-OR otherwise R-NOR.(b) Present in India for atleast 730 days in last 7 years

immediately preceding the relevant PY.

Residential Status of other personControl & Management of the affairs of the business

In India Outside IndiaS 6(2) HUF / Firm / AOP / BOI

Wholly / Partially WhollyS 6(3) Foreign CompanyS 6(4) Local authority / AJP

Resident Non-Resident

Note : Residential Status of Indian Company is always resident irrespective of control and management of affairs of the business.

Page 2 of 44

S 5. Incidence of taxR-OR R-NOR NR

1. Income which accrues or arise in India. (Indian Income)

Taxable Taxable Taxable

2. Income which accrues or arise outside India.(Foreign Income)

Taxable Not Taxable. However in case of Not Taxable but if

income is received in India then taxable.

Business Income Professional IncomeTaxable if business is controlled from India

Taxable if Profession is set up in India

Taxable if any income is received in India.

S 9(1). Income deemed to accrue or arise in India(i) • Income from Business Connection.

Business outside India and part activity of business carried out in India.

Also called permanent establishment or territorial nexus.

Exceptions to the Business Connection.a. All operation not carried out in India.b. Purchase for export.c. Collection of news.d. Shooting of film in India by foreign citizen.

• Assets located in India.(ii) Services rendered in India by any person.(iii) Services rendered outside India by Indian Citizen. Employer is Govt. of India. However as per

S 10(7) allowances and perquisites are exempt from tax. Only basic salary is taxable.(iv) Dividend from Indian Company. However it is exempt from tax u/s 10(34)(v) Interest on Loan which is used in India. If interest, royalty or FTS is payable by

Govt. of India then such income deemed to accrue or arise in India whether there is

business connection or not.(vi) Royalty from knowledge which is used in India.(vii) Fees from technical services where technical agree-

ment is implemented in India.

Section 2(25A). India includes territorial waters of India, its continental shelf, air space above territorial waters and exclusive economic zone.

Oil Rig

Person of Indian Origin

Page 3 of 44

3Income from Salaries

Section 15 to 17

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S 15. ChargeWhich income is charged under the head Salaries

Where there exists a relationship of employer and employee. Where an individual is bound to follow the instructions of other it is said that there exists a relationship of ER and EE.

When is salaries charged to tax.

Salaries charged to tax either on DUE or RECEIPT whichever matures earlierException : Following salaries charged to tax only on receipt basis.

Advance salary. Bonus. Salary in lieu of notice period

Arrears of salary if salary is increased with retrospective effect.

However all perquisites are taxable on provided basis. But LIP on due basis, Re-imbursement on paid basis.

Allowances = Cash + Particular Purpose + Fixed

Fully Exempted Allowances

S 10(7). ER : CG. EE : Indian Citizen working abroad then allowances and perquisites fully exempt.

Allowances to High Court / Supreme Court Judges is fully exempt.

Salary to UNO employees is fully exempt.

Basic Salary Allowances PerquisitesS 10(7). ER : CG. EE : Indian Citizen working abroad

Taxable Exempt Exempt

High Court / Supreme Court Judges Taxable Exempt TaxableUNO employees Exempt Exempt Exempt

Fully Taxable Allowances (SCOPE DRAFT)

Servant City Compensatory Overtime Project EntertainmentDearness Rural Absent Fixed Medical Tiffin

High cost of living Marriage Telephone Holiday HomePhysically fit allowance Lunch Breakfast Dinner

Special Allowances

Part 1 exemption

Amount spend towards official or specified purpose.

Part 2 exemption

Amount as specified in Income Tax Rules.

THAR DUCT Transport

Transfer Helper Academic R & D Children education

upto ₹ 100 pm is exempt. Max 2 child.

Daily Uniform Conveyance Travelling Hostel upto ₹ 300 pm is exempt. Max 2 child.

Outstation allowances

10,000 p.m. or 70% of allowance whichever is lower is exempt.

Partially exempted Allowances (HRA)

Maximum 50% of SAS / 40% of SASLeast is exempt

from tax.

Actual ActualFormula Rent paid – 10% of SASSAS = BS + DA() + Commission (if)

allowanceupto ₹ 800 pm / ₹ 1600 pm is exempt.

Page 4 of 44

Deduction u/s 16(ii) : Entertainment Allowance Deduction u/s 16(iii) : Professional Tax Deduction allowed only to Govt. EE. Professional tax / Employment tax

Maximum 5,000 Least is

deductible

Deduction allowed in the financial year of payment. Where this tax is paid by ER on behalf of EE then it is first added to gross salary and then deduction is allowed.

Actual ActualFormula 20% of basic Salary

Specified Employee. If any of the 3 condition is satisfied an employee is treated as specified employee. [17(2)(iii)]

Non Specified Employee.

1. Employee + Director If none of the conditions are satisfied then employee is treated as non specified employee.

2. Employee + Substantial Interest. S 2(32) An employee holding atleast 20% voting power in a company.

3. Income from Salary less salary in kind exceeds ₹ 50,000

S 17(2). Perquisites. [Category A Perquisites : AFLO SUL GMHCC EA]. Taxable in both the case of employees : Specified EE and Non Specified EE.A Accommodation Cities having a population (Census of 2001) of

Accommodation is upto 10 Lakhs more than 10 Lakhs & upto 25 Lakhs

exceeds 25 Lakhs

Owned by employer

7.5% of AS is taxable

10% of AS is taxable

15% of AS is taxable

Hired by employer ‘Lease rent’ or ‘15% of AS’ whichever is lower is taxable

AS shall be computed on due basis for the period accommodation is occupied by EE.AS = Accommodation Salary = BS + DA() + Commission + all taxable allowances + Fees. AS do not include perquisites, ER’s contribution towards PF and DA not forming part of salary.Hotel Accommodation : 24% of AS or hire charges whichever is lower is taxable. Exempt for upto 15 days if hotel accommodation is provided to EE if transferred from one city to another city.

F Furniture Owned by Employer : 10% pa of the original cost of the asset is taxable.Hired by Employer : Actual hire charges is taxable.

L Life Insurance Premium

Paid by EE. Deduction allowed u/s 80C.Paid by ER on behalf of EE. Taxable under head Salary on due basis and deduction

allowed u/s 80C on paid basis.Exempt. Staff group insurance is fully exempt from tax.

O Obligation of EE discharged by ER

Official Purpose Fully exempt Taxable on paid basis.Personal Purpose Amount re imbursed is fully taxable.

S Sale of movable assets.

Purchase price of the movable asset xxxLess : Depreciation for completed year

EXEMPT if :a. Computer or electronic item related to computer 50% WDV

(xxx)b. Motor Car 20% WDV

1. Sale of SIT by ER to EE

c. Other Asset 10% SLMCost of the asset to the employer xxx

2. Gift of asset upto ₹ 5,000.

Less : Sale price of asset to employee (xxx)Value of sale of movable asset xxx

U Use of asset Owned by Employer : 10% pa of the original cost of the asset is taxable.Hired by Employer : Actual hire charges is taxable.Exempt Use of computer, laptop and telephone is exempt from tax.

Page 5 of 44

L Loan Facility from ER’s own account

SBI lending rate as on 1-4 x amount of each loan outstanding on the last day of each month.Not taxable if 1. If aggregate of loan amount do not exceeds ₹ 20,000.

2. Loan is taken for medical treatment of specified disease.

G Gifts in Kind upto ₹ 5,000 is exempt from tax.in cash fully taxable. It is bonus taxable on receipt basis.

M Meal Facility

Own canteen

Meals provided during office hours at office premises.

Taxable Cost to the employerExempt upto ₹ 50 per meal

Outsourced canteen

Meals provided during office hours and eatable at eating joints.

Taxable Amount paidExempt upto ₹ 50 per meal

Exempt • Tea or snacks fully exempt from tax. • Meal provided in remote area or off shore installation fully exempt from tax.

H Holiday Home / Facility : Tour, Travel & Accommodation

Provided uniformly to all employees

Cost to the employer is taxable.

Provided only to keyman / selected employees.

Market fees of similar guest house / hotel is taxable.

Exempt Official purpose is exempt.

C Credit Card Facility

Personal Purpose Amount paid / re imbursed is taxableOfficial Purpose Exempt. Proper record has to be maintained for claiming exemption.

C Club Facility

Personal Purpose Amount paid / re imbursed is taxableOfficial Purpose Exempt. Proper record has to be maintained for claiming exemption. Exempt Corporate membership is exempt. Health Club for all EE is exempt.

E ESOP FMV on exercise date less recovery is taxable.

A Approved Superannuation Fund ER’s contribution in excess of ₹ 1,00,000 is taxable.

Category B Perquisites. [GET MSc]. Taxable only in case of Specified EE on provided basis. If GETMSc is re- imbursed then it becomes obligation of EE discharged by ER. Any amount re-imbursed is tax-able in both the cases of EE - specified EE / Non Specified EEG Gas/ Electricity / Water

facilityOwn Manufacturing cost per unit is taxablePurchase from outside agency Cost to the employer is taxable

E Education Facility

Own Taxable Market fees Exempt ₹ 1,000 p.m. per child is exemptHired Cost to the employer is taxableExempt Scholarship is exempt u/s 10(16) Training of employee is exempt.

T Transport Facility Railways / Airline Exempt

M(medical)

1. Employer’s Own Hospital Fully exempt. Family members :

Box 1 Box 2Self, Spouse

& children (depen-dent / not dependent)

Parents, Brother & Sister (only

dependent)

2. Private Hospital Exempt upto ₹ 15,000.3. Govt. Hospital Fully exempt.4. Treatment of prescribed

disease in approved hospitalFully exempt.

5. Re imbursement Exempt upto ₹ 15,000.

S Servant Facility Cost to the employer is taxable or Salary of servant is taxable.

Page 6 of 44

C

CAR

facility

Car Facil-ity

RE = Regu-lar ex-pens-es

Use : 10% of origi-nal cost

Cas es

Car is owned or hired by

RE borne by

Car used wholly for personal purpose

Car is used for mixed purpose

A Cat B

ER ER Use+ regular expenses + salary of driver – recovery is

taxable.

upto 1600 cc 1,800 p.m. taxable recovery

not

applicable

Exceeds 1600cc 2,400 p.m. taxableDriver 900 p.m. taxable

B Cat B

ER EE Use+ salary of driver – recovery is

taxable.

Upto 1600cc 600 p.m. taxableExceeds 1600cc 900 p.m. taxableDriver 900 p.m. taxable

C Cat A

EE ER regular expenses + salary of driver –

recovery is taxable.

Upto 1600cc 1,800 p.m. exempt.Exceeds 1600cc 2,400 p.m. exempt.Driver 900 p.m. exempt.

Recovery is applicable.

Category C Perquisites : FULLY EXEMPTED PERQUISITES1. Staff group insurance. 11. HHF – official purpose exempt.2. Use of laptop, computer & telephone is exempt. 12. Meal upto ₹ 50 per meal is exempt.3. Gifts in kind upto ₹ 5,000 is exempt. 13. Meal in remote area is exempt.4. Sale of SIT to its employees is exempt. 14. Hotel accommodation – transfer and upto 15 days.5. The other asset which is 10 year old is exempt. 15. Education facility upto ₹ 1,000 p.m. / child.6. Loan facility upto ₹ 20,000 is exempt. 16. Training of EE’s7. Loan given for treatment of specified disease. 17. S 10(16). Scholarship.8. Credit card / club if given for official purpose. 18. Medical facilities upto ₹ 15,000.9. Health club – for all employees 19. Medical facility in Own / Govt. hospital.10. Corporate membership – initial fees is exempt 20. Medical treatment of specified disease in an

approved hospital

Say whether following allowances and perquisites taxable or not?Medical allowanceFully taxable

Medical facilitiesExempt upto ₹ 15,000

Car Allowance (Mixed) / Conveyance allowanceOfficial : Exempt. Personal : Taxable

Car facilities (Mixed)1,800 / 2,400 / 600 / 900 p.m. taxable

Transport AllowanceExempt upto ₹ 800 p.m.

Conveyance facility (resi to office and back)Fully exempt

HRALeast of MAF is exempt

Accommodation7.5% / 10% / 15% of AS is taxable

Servant AllowanceFully taxable

Servant FacilitiesFully taxable

Meal AllowanceFully taxable

Meal FacilitiesUpto ₹ 50 per meal is exempt

Children Education Allowance₹ 100 p.m. + 300 p.m. Max 2 child is exempt

Education FacilitiesCollective enjoyment : Market fees is taxable. ₹ 1,000 p.m. / child is exempt. (no limit to number of child)

Telephone AllowanceFully taxable

Telephone facilities for personal purposeFully exempt.

Use of furniture10% p.a. of cost of furniture is taxable

Loan FacilitySBI lending rate is taxable

Gift in kindExempt upto ₹ 5,000

Gift in cash (Bonus)Fully taxable

Page 7 of 44

PROVIDENT FUND SPF PPF URPF RPF1. Employer’s

contribution towards PF.

Not Taxable

Does not contribute

Not Taxable Excess of 12%

of SAS is taxable

At the time of lump sum withdrawal

Taxable under the head SALARY

2. Employee’s contribution towards PF. Whether deduction u/s 80C available?

Available Available

Not Available

AvailableAt the time of lump sum withdrawal

Not Taxable since already taxed.

3. Interest credited to PF.

Not Taxable

Not Taxable

Not Taxable

Excess of 9.5%

is taxable

At the time of lump sum withdrawal

Interest on

ER’s contrib.

Taxed under the head

SALARYEE’s

contrib.Taxed under the head OS

4. Lump sum withdrawal from PF.

Exempted u/s 10(11)

Exempted u/s 10(11) Taxable Exempted

u/s 10(12)EEE EEE EET EEE

S 10(10). GratuityGovt.

employees Employees covered under the Payment of Gratuity Act, 1972

Other Employees (as per terms of contract of employment)

Maximum Fully exempt from tax

10,00,000 (life time exemption)Least

is ex-

empt

10,00,000 (life time exemption)Least

is ex-

empt

Actual Actual ActualFormula BS + 100% of DA

----------------------- x 15 x CYSr 26

Avg SAS ------------ x 15 x CYSi 30

Salary NA BS + 100% of DA at the time of retirement

SAS = BS + DA () + Commission (if)Avg SAS is computed for last 10 months immediately preceding the MONTH of retirement.

CYS. Completed year of service

if completed year of service is more than 6 month take it as 1 year

ignore the part of month.

S 10(10A). PensionUncommuted pension Commuted pensionFully taxable whether

Govt. EE or Private EE.Government Employee Private EmployeesFully exempt from tax Receives gratuity Do not receive Gratuity

1/3 of Full Value of Pension is exempt.

1/2 of Full Value of Pension is exempt.

S 10(10AA). Leave SalaryGovt. Employees Private Employees

Maximum Fully

exempt

from

tax.

3,00,000 (life time exemption) Least is exempt from tax

Actual Actual Leave SalaryFormula 1 10 x Average SASFormula 2 Earned leave (in months) x Average SASSAS SAS = BS + DA () + Commission (if)

Avg SAS is computed for last 10 months immediately preceding the DATE of retirement.

Page 8 of 44

4Income from House Property

Section 22 to 27

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Section 22. ChargeLAW : The Annual Value of building or land attached thereto of which assessee is the owner not occupying the building for his own business or profession.Annual Value It represents the earning capacity of building. Section 23.Building. (Construction should be completed)

Residential Four walls with roof.Commercial Four walls optional roof.

Land attached with building

Land attached with building Charged under the head House Property.Independent Land Charged under the head Other Sources.

Owner Registered Owner Register maintained with Stamp Valuation Authority.

Deemed Owner 6 cases of deemed owner specified in Section 27.

Owner not occupying the building for his own business or profession.

Let out to employees Charged under the head Business.Let out to others Charged under the head House Property.

Section 27. Deemed Owner (6 points)(i) An individual (Transferrer) who transfers House Property to

spouse without consideration, then individual who transfers the property is treated as deemed owner.Exception : Property is transferred with an agreement to live apart then registered owner (transferee) is treated as owner.

Transferrer TransfereeHusband - DO Wife

Wife - DO Husband

Husband Wife - RO

(ii) An individual (Transferrer) who transfers House Property to a minor child, without consideration such individual who transfers the property is treated as deemed owner. Exception : Where the minor child is a married daughter then deemed owner concept is not applicable. Income from HP chargeable in the hands of minor married daughter itself.

Transferrer Transferee

Father - DO Minor Child

Mother - DO Minor Child

Father / Mother Minor married

association of person who is allotted a building under a house building scheme of such society.

Registered Owner Deemed Owner

Co-operative Society Member

(v) A person who is allowed to take or retain possession of any building or part thereof in part performance of a contract where every formality of sale is completed except registration of property with Stamp Valuation Authority.

Seller (received the full price)

Buyer (has key of property)

Registered Owner Deemed Owner

(vi) A person who acquires any right in any building by way of lease for a term of atleast 12 years.

Lease Terms Lessor Lessee12 years RO DO11 years RO Tenant

Section 23. Annual ValueLAW : Annual Value is value after deduction of municipal tax.Municipal Tax. It’s deduction is allowed in the financial year in which payment is made by the owner. PAID basis + Owner. Tenant pays dedn not allowed.

GAV xxxLess : MT (xxx)NAV xxx

daughter - RO(iii) Holder of an impartible estate.(iv) A member of a Co-operative society, Company or other

Page 9 of 44

(1) (2) & (3) (4)Let out property SOP -

Residence for

whole year

DLOP

(owns more than 1 SOP - R : one property whose GAV is highest

treated as SOP - R remaining property

as DLOP)

(a) (b) (c)ER AR Loss on account of

vacancyER = MV or FR

whichever is higher or SR

whichever is lower.

AR = Rent received or receivable. = Let out period + Vacant Period – unrealised rent of current financial year.

(ignore SOP - R)

Property is lying vacant inspite of the best effort of the owner to let the

property.

GAV = ER or AR whichever is higher less loss on account of vacancy.

GAV = ER = Nil

GAV = ER

Section 24a. Standard DeductionStandard Deduction allowed is 30% of NAV. It is automatic deduction i.e. even if question do not provide it this deduction must be allowed. No Standard deduction if NAV is nil or negative.

Section 24b. Interest on borrowed capital1. The loan should be borrowed for PCR5.

Purchase, Construction, Re - construction, Repairs. Renovation, Renewal, Repayment of existing housing loan. Note : Dedn. not allowed if loan is borrowed for payment of MT, interest on interest or penal interest.

2. The interest is allowed as deduction on accrual basis. Even if interest is not paid deduction is allowed.

3. Interest is allowed as deduction from that PY in which construction of building is completed or building is purchased.

Pre construction period interest Post construction period interestTotal Interest before the FY in

which building comes into existence --------------------------------------------- =

5

allowed from FY in which building comes into existence.

Allowed from FY in which building comes into existence. This interest keeps on decreasing with the re payment of loan.

Let out / DLOP / Vacant

SOP - Residence

Any amount of

interest is allowed

as deduction. (No Limit)

Interest both pre + post limited to₹ 2,00,000 if all the following

3 conditions are satisfied.otherwise ₹ 30,000.

1. The loan is borrowed on or after 1-4-1999 The loan is borrowed before 1-4-1999

2. The loan is borrowed for purchase or construction of residential house property.

The loan is borrowed for repairs, renewal.

3. The building comes into existence within 3 years from the FY in which loan is borrowed. [FYloan + 3 years]

The building comes into existence after 3 years.

Section 25. Restriction on deduction of interest Where interest is payable outside India but is paid without deducting tax at source then such interest is not allowed as deduction.

Section 25AA. Recovery of unrealised Rent Section 25B. Receipt of arrears of rentTiming of taxation In the year of receipt In the year of receiptHead House Property even if building is

transferredHouse Property even if building is

transferredStandard Dedn. Not available Available @ 30% of arrears of rent.

Page 10 of 44

Section 26. Co-owner1. Co - owner not assessed as AOP.2. Each owner treated as individual.3. Each owner entitled to benefit of SOP-R whose GAV is nil.4. Each co owner entitled to deduction of interest to a max of ₹ 30,000 / 2,00,000.

Computation of Income from House Property (23 – 24 + 25AA + 25B)MV GAV HPFR MT + 25AA (SD not allowed)SR NAV + 25B (30% of arrears of rent allowed)ER – SD HPAR – InterestLoss on account of vacancy HPGAV

What you should never forget in HP while solving practical questions1. Fair Rent should be given in the question. If it is not given then actual rent is treated as fair rent.2. Expected rent is always computed for 12 months. It can be less than 12 months only if the property

comes into existence in same PY of computation.3. Interest is limited only in case of SOP-R. In remaining cases actual amount of interest is allowed as

deduction.4. MT is allowed as deduction on paid basis. Interest on accrual basis. SD on uniform basis.

Page 11 of 44

5Depreciation

Section 2(11), 32, 38, 43, 50

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Section 2(11). Block of AssetThe term ‘block of assets’ means a group of assets falling within a class of assets in respect of which same percentage of depreciation is prescribed. (Similar assets having same rate of depreciation).

Eligible assets and its rate of depreciationAsset Full rate of depreciation Half rate of depreciation

1. Building. It means superstructure only and does not include site Asset is purchased and put to use in the same previous year for less than 180 days.

a. General 10%b. Residential Building 5%c. Hotel Building 10% Nil depreciation ifd. Temporary Building 100% 1. Closing WDV is nil

or negative; or2. Furniture or fittings including electrical fittings 10%2. BOA do not exists.

3. Plant & Machinery

[S 43(3)]

“Plant” includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession. It does not include tea bushes or livestock or buildings or furniture and fittings.

Section 32. Conditions for claiming depreciation

a. General 15% 1. Asset is owned wholly or partly by the assessee.

b. Motor Vehicle 15%c. Annual books used by professional 100%

2.Asset is put to use in the relevant previous year.

d. Other books used by professional 60%e. Any books used in business 15%f. Computer including software 60%g. Ships 20%

3.

Asset is put to use for the purpose of business or profession.

h. Aeroplane and aero engines 40%i. Pollution control equipment 100%

4. Intangible Assets

Know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature (Brokership rights and goodwill of business) [KPCTLF b/c r]

25%It is mandatory to claim depreciation. In passive use depreciation is available.

Section 43(6). Computation of depreciationOpening WDV + Purchase of assets (Actual Cost) – Sale of assets = Closing WDV – Depreciation = Opening WDV

Section 43(1). Actual CostInvoice Price – Subsidy + Duties and taxes if credit not claimed + Transportation Cost + Insurance of asset + Training of employees + Interest till the asset is put to use + Travelling expenses incurred by employees for making survey of asset.

Sale of asset / Destruction of assetMoney value of asset / Insurance claim received shall be deducted from opening WDV.

Section 50. Computation of Capital Gain in case sale of depreciable assetIn case when depreciation becomes nil capital gain arises. (always STCG)

Computation : Sale consideration – Opening WDV – Purchase of asset – Transfer expenses = STCG

Page 12 of 44

6PGBP

Section 28 to 44D

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What is business income ? Section 28Business Profession Salary of partners Non Competing

feesKeyman insurance Speculative income

What is business expenses? Section 30 to 37 subject to section 40 to 43BEE Asset Liabilities Client Reputation of

Company

Section 28. Charge1. The profit of business or profession carried on by the assessee at any time during the relevant PY.

2(13) Business includes trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture

2(36) Profession includes vocation. (Hobby turns into economic activity)Assessee The person who carries on the businessCommencement of business The financial year in which trial run is completed.

2. Export incentivesa. Profit on sale of import licenceb. Subsidyc. Duty Drawback.

3. Professional Gifts4. Any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received

by, a partner of a firm from such firm. However share of profit from firm is exempt in the hands of partners u/s 10(2A).

5. Non - competing fees. Not doing any competitive business or not sharing any business secrets.6. Any sum received under a Keyman insurance policy including the sum allocated by way of bonus on

such policy. 7. Income from speculative transaction.

43(5) Speculative transaction means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips.

Section 30. Rent, rates and taxes of premises Section 31. Insurance, repairs of plant, machinery & furniture (PMF).

1. Rent of the premises paid to others / Firm is allowed as deduction.

1. Rent of the PMF paid to others / Firm is allowed as deduction u/s 37.

2. Insurance of premises is allowed as deduction. 2. Insurance of PMF is allowed as deduction.3. Municipal tax, land revenue subject to S 43B

is allowed as deduction.3. Not applicable

4. Current repairs is allowed as deduction. On capital repairs depreciation can be claimed.

4. Current repairs is allowed as deduction. On capital repairs depreciation can be claimed.

Current Repairs Capital Repairs1. Replacement of part of asset. 1. Replacement of whole of asset / Addition of asset.2. Renovation of that premises from where sale

is made. E.g. Resturant.2. Renovation of administrative premises. E.g.

Godown.

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Section 38(2). Asset partly used for business / ProfessionAbove expenditure shall be apportioned to that part of asset which is used for the purpose of business.

Section 36(1). Amount expressly allowed as deduction36(1)(i) Insurance premium of stock in trade is allowed as deduction.

36(1)(ib)Insurance premium on health of employees is allowed as deduction ifa. Health Insurance is taken on health of all employees; andb. Health insurance premium is not paid in cash.

36(1)(ii) Bonus or commission to employees is allowed as deduction.

43B : Bonus is allowed as deduction if actually paid.

36(1)(iii)Interest on borrowed capital used for the purpose of business or profession is allowed as de-duction. Interest till the asset is put to use is not allowed as deduction. As per S 43B if interest to Banks / FI is actually paid then deduction is allowed.

36(1)(iv)Employer’s contribution paid towards recognised provident fund or an approved superannuation fund is allowed as deduction.

Restriction on deductionS 40A(7) : Contribution towards unapproved gratuity fund is not allowed as deduction.36(1)(iva) Employer’s contribution towards pension scheme referred

in section 80CCD is allowed as deduction. S 40A(9) : Contribution towards any Non-Statutory fund or unapproved fund is not allowed as deduction. Also contribution made towards any other fund not allowed as deduction.

36(1)(v)

Employer’s contribution paid towards an approved gratuity fund is allowed as deduction.As per S 43B if ER’s contribution to above funds is ac-tually paid in respective funds then deduction is allowed.

36(1)(vii)Bad Debts is allowed as deduction if debt was treated as income in the earlier PY. Recovery of bad debt is taxable under the head business if earlier it was allowed as deduction. Such recovery always taxed under the head business even if business is closed down.

36(1)(ix)Applicable to Company who incurs expenditure on promotion of family planning amongst employees.

Revenue expenses. Capital expenses100% allowed 1/5th allowed

36(1)(xv)Securities transaction paid allowed as deduction if profit from shares is charged under the head business.

Business Capital GainAllowed Not Allowed

Section 35. Expenditure on Scientific ResearchInhouse research : Research should be related to the business Contribution to outsiders

Research may or may not be related to the business.

After COB (100% / 200%)

Before COB (only 100%) (only 3 years)

Revenue expenditure National Laboratory /IIT’s

200%a. Rent of premises allowed Not allowed 200%

b. Salary to scientist allowed allowed except perquisites of scientist

Approved University, Colleges, institution.

175%

c. Raw material / inputs allowed allowed Social statistical research

125%d. Salary of support staff allowed not allowedCapital Expenditure 200% if own research by

a. Cost of building allowed (only 100%) allowed

a. Companyb. Research in all products

except tobacco, cold drinksb. Cost of plant &

machinery allowed allowed c. Research is approved and expenses audited

Section 35D. Amortisation of Preliminary ExpensesEligible expenses : Incurred before COB (trial run) or incurred for extension / expansion of business.a. Preparation of feasibility report. f. Legal charges for drafting, printing of MOA & AOA.b. Conducting market survey or any other

survey necessary for the business.g. Registration fees of a company paid to Registrar of

Companies. (Stamp duty).

Page 14 of 44

c. Preparation of project report. h. Expenses and legal charges incurred in drafting, printing and advertising for prospectus.

d. Engineering services relating to the business.

i. Expenditure incurred on issue of shares or debentures like underwriting commission, brokerage. (Entire public issue expenses).

e. Legal charges for drafting any agreement relating to the setting up or conduct of the business.

Note : What is not preliminary expenses. (a) Salary to employees (b) Rent of premises.(c) Interest

Applicability Amount of deduction1. Indian

Company5% of Cost of project or 5% of capital employed whichever is higher; or } lower

5Eligible expenses2. Other

Residents5% of Cost of project or Eligible expenses whichever is lower 5

Cost of project : All cost of assets Capital employed : Share capital + long term loans

Section 37. General Deduction

1. Expenditure is not covered u/s 30 to 36.

Losses covered u/s 28. E.g. Under valuation / Over valuation of stock.

2.Expenditure is incurred wholly & exclusively for the purpose of business.

Expenditure incurred on EE’s. Maintenance of assets.Expenditure incurred on clients.

Expenditure incurred on reputation of organisation.

3. Expenditure is not of capital in nature.

E.g. Public issue expenses is capital expenditure. Note : Advertisement expenses

incurred in a brochure of political party not allowed as deduction.4. Expenditure is not personal

nature. E.g. Household expenses.

5.Expenditure should not be in nature of offence or prohibited by Law.

Payment of bribe, Penalty for infringement of law not allowed as deduction. Payment of ransom money, hafta is allowed as deduction.

Business Expenditure

Personal Expenditure

Revenue Expenditure

Capital Expenditure

Whether allowed?

1. Expenditure incurred on develop-ment of website

Yes No Yes No allowed

2. Salary to Staff Yes No Yes No allowed3. Expenditure incurred on issue of

bonus sharesYes No Yes No allowed

4. Listing fees Yes No Yes No allowed5. Rent of building which is owned by

proprietorYes Yes Yes No Not

allowed6. Interest on loan taken for payment

of dividend.Yes No Yes No allowed

7. Income Tax / Wealth Tax No Yes Yes No Not allowed8. Indirect Tax Yes No Yes No allowed

Section 40A(2). Unreasonable payment to relatives / substantial interestUnreasonable payment made to relative as determined by AO is not allowed as deduction. Market price shall be determined as per Arm’s Length Price. ALP is determined u/s 92C.

Section 40A(3). Cash ExpenditureApplicability Non Applicability

Expenses in cash exceeding ₹ 20,000 in a single day to same person shall not be allowed as deduction.

1. Payment made to Banks, FI, Govt.2. Payment made to farmers for its produce.

Note : For truck operator take ₹ 35,000. 3. Payment made at a place not served by Bank.

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Section 43B. Certain expenses deduction allowed on actual payment basisPayment covered Timing of Deduction

1. Interest payment to banks Payment before Due Date Payment after Due Date2. Indirect tax payment to Govt. In the year of accrual of expenses In the year of payment

3. ER’s contribution to PF, Gratuity Fund, Leave salary, Bonus & com

Note : For payment not covered u/s 43B expenses deduction allowed on the basis of accounts maintained by the assessee

Section 44AD & 44AE. Presumptive basis of TaxationCommon points1. Section 30 to 44D is not applicable. It means further business deduction is neither allowed nor disal-

lowed. Section 32(2) not applicable. Section 40 to 43B not applicable. Other income can be added to this income.

2. Losses u/s 70 to 80 can be adjusted with this income. Where however the business is carried on a partnership basis, remuneration to partner and interest to partner is allowed as deduction u/s 37 but subject to section 40b.

3. Deduction u/s 80C to 80U is allowed from this income.4. Administrative

convenience.a. S 44AA & 44AB not applicableb. No need to pay advance tax

Section 44AD Section 44AEApplicability a. Ind / HUF / Firm a. Any person.

b. Resident b. Resident / Non ResidentTurnover upto ₹ 1 Crore No such requirement instead total truck should not

exceed 10 at any time during the PY.Not applicable Profession, Agency Business,

Commission or brokerage income.No such requirement

Presumptive income

8% of Turnover Heavy Truck ₹ 7,500 p.m. during which truck is ownedMedium / Light ₹ 7,500 p.m.

Page 16 of 44

7Capital Gain

Section 45 to 55A

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Section 45(1). ChargeProfit arising from transfer of capital asset is chargeable under the head capital gain in the year of transfer.

45(1) = 2(14) + 2(47). YOC = YOT

Capital asset : 2(14) Transfer : 2(47)

Exceptions to YOC = YOT : In following cases capital gain is charged to taxed on receipt basis.• S 45(1A). Insurance compensation. YOC = Year in which insurance

compensation is received.• S 45(2). Conversion of asset into SIT. YOC = Year in which SIT is sold.

• S 45(5). Compulsory acquisition of the property. YOC = Year in which whole or part of initial compensation is received.

Section 2(14). Capital AssetCapital Asset means property (bundle of rights) of any kind.

whether (it means every kind of right is a capital asset)movable immovable Personal use Business use

Excludes 1. SIT, RM, Consumable stores held for business.2. Agricultural Land situated in rural

area.Urban area : Municipal limits and upto 2 /6 / 8 k.m. (aerial distance)

3. Personal Assets held for daily use. Not personal assets : JAD P SA therefore it is capital asset.4. Gold Bonds 1999 5. Special Bearer Bond 1991

Nature of Asset STCA LTCA(a) Depreciable assets always STCA always STCA(b) Financial assets are a. Listed shares. b. Listed bonds

1 year or less more than 1 yearc. Govt. Securities d. Units of equity oriented fund e. ZCB

(c) Other capital assets 3 years or less more than 3 yearsNote : In computing period of holding the day the asset is transferred is excluded.

Section 2(47). Transfer1. Sale, Exchange and Relinquishment of the asset. 2. The extinguishment of any rights therein.3. The compulsory acquisition of the asset by the Govt. 4. Conversion of asset into stock-in-trade.5. Possession of any immovable property in part

performance of a contract.6. Any transaction which has the effect of transferring, or

enabling the enjoyment of, any immovable property. 7. Maturity or redemption of zero coupon bond.

Section 47. What is not transfer Gift, will or inheritance of property

Section 48. Computation of STCG Section 48. Computation of LTCGFull value of consideration xxx Full value of consideration xxx(–) Cost of Acquisition (COA) (xxx) (–) Indexed Cost of Acquisition (COA) (xxx)(–) Cost of Improvement (COI) (xxx) (–) Indexed Cost of Improvement (COI) (xxx)(–) Expenses on transfer (xxx) (–) Expenses on transfer (xxx)STCG xxx LTCG xxx

Formula for indexationIndexed COA = Indexed COI =

Index value of transfer year----------------------------------------------------Index value of acquisition year in which the

assessee first acquired the asset

x COAIndex value of transfer year

------------------------------------------Index value of improvement year

x COI

Note : No Indexation bonds or debentures even if LTCA. [Proviso 3 to S 48]

Page 17 of 44

S 48. Full Value of Consideration (FVC)General

casesConsideration in cash Amount received or receivable.Consideration in kind FMV of asset.

Special Cases

50C Land & Building : Higher of Stamp value or consideration.45(1A) Insurance claim.45(2) FMV on date of conversion of asset into SIT.45(3) Admission of partner. Amount recorded in books of accounts.45(4) Dissolution of firm. FMV as on date of distribution.45(5) Initial compensation.

S 55(2). Cost of Acquisition (COA)General Purchase price + Brokerage paid on acquisition of asset COA if asset is acquired before 1-4-1981

(Purchase price + Brokerage) or FMV as on 1-4-1981 whichever is higher.

COA of shares.

STT is ignored both at the time of purchase & at the time of sale.

a. In case of original shares Purchase price + brokerage.b. In case of bonus shares Nil

However if bonus shares are allotted before 1-4-1981

FMV as on 1-4-1981.

c. Right shares• Existing shareholder Purchase price paid to Company• New Shareholder Price paid to Co.+ Price paid to renouncer.

d. Right share entitlement Nil

COA of self generated assets.

Note : If the asset is purchased then purchase price is the COA.

Note : FMV as on 1-4-1981 is ignored.

COA COIa. Brand name & Trademark associated with the

business. (not of a profession)Nil NA

b. Tenancy rights. Nil NAc. Goodwill of a business (not of a profession) Nil Nild. Right to manufacture, produce or process any

article or thing, for a consideration (Patent)Nil Nil

Section 49(1). Deemed cost of acquisition

Section 49(4). Deemed cost of acquisition where value is taxed u/h ‘Other Sources’

In case of Land and Building is gifted and S 56(2)(vii) is applicable then COA = Amount taxed under the head OS.

In case of Land and Building is sold and S 56(2)(vii) is applicable then COA =

Purchase price + Amount taxed under the head OS.

In case of JAD PB SAS is gifted and S 56(2)(vii) is applicable then COA = Amount taxed under the head OS.

In case of JAD PB SAS is sold and S 56(2)(vii) is applicable then COA =

Purchase price + Amount taxed under the head OS.

Expenses on TransferExpenditure incurred on transfer of asset. E.g. Brokerage on transfer of asset etc. However STT is ignored.

Special cases of computation (Deemed Transfer)45(1A) 45(2) 45(3) 45(4) 45(5)

Title Insurance claim on destruction of

assets.

Conversion of capital asset

into SIT

Admission of partner

Retirement of partner or

dissolution of firm

Compulsory acquisition

Full value of consideration

Insurance claim FMV on the date of

conversion

Amount recorded in books of

accounts

FMV on the date of distribution

Initial compensation

In case the asset is acquired through a mode given in section 47 (Gift to relative or will) then cost of acquisition is cost to the previous owner. Previous owner is the person who acquires the asset by paying the price. Period of holding shall be computed from the date the previous owner acquires the asset.

Page 18 of 44

YOC Year of receipt of insurance claim

Year of sale of SIT

YOT YOT Year of receipt of initial

compensationIndexation Year of destruction

to Year of acquisition

Year of conversion to Year of acquisition

Year of transfer to year of

acquisition

Year of distribution to

year of acquisition

Year of compulsory

acquisition to year of acquisition

Section 54 to 54GB Exemptions YOC = Year of Chargeability YOT = Year of transferAE = Actual Exemption TE = Temporary exemption ZD = Date of sale of original asset

54 54B 54EC 54F 54GA1. Title RHP transferred .

RHP acquiredUAL transferred. UAL/RAL acquired

Any LTCA trans-ferred. 2 specified assets acquired. NHAI+RECLLock in 3yrs

Any LTCA (other than RHP) transferred. RHP acquired.

Acquired land, building, plant & machinery trans-ferred. Acquired LBPM in SEZ

2. Conditionsa Eligible

AssesseeInd/HUF Individual / HUF Any assessee Ind/HUF Any assessee

b Eligible asset which is being transferred

RHP+LTCA located in India

Urban AG landAtleast 2 yr old ST / LT

Any LTCA Any LTCA other RHP

Land, Bldg, Plant of urban area

c Time limit of purchase new asset

(P)1 yr <-- ZD-->2(P)/3(C) yr

ZD-->2 yrs (P) ZD-->6 months (P)1 yr<-- ZD-->2(P)/3(C) yr

(P/C)1 yr<-- ZD-->3(P/C) yr

d Deposit scheme

Applicable Applicable Not Applicable

Applicable Applicable

3. Amount of exemption

AE+TE AE+TE AE. Max ₹ 50 Lakhs in 2 FY

LTCG--------xRHPNSC

AE+TE

4. Consequences 1Deposited amount unutilised

TE – AE=LT

YOC = ZD+3yr

TE–AE=ST/LT

YOC=ZD+2yrs

NA Proportionate(TE–AE)=LT

YOC=ZD+3yrs

TE–AE=ST/LT(YOC=ZD+3yrs)

Consequences 2New asset transferred within 3 years from the date of acquisition

LT+ST=STYOC=YOT

LT/ST+ST=ST(YOC=YOT) ** Where RAL is transferred no capital gain arises, since not a capital asset.

LT=LTST=ST (YOC=YOT)

LT=LTST=ST (YOC=YOT)

LT+ST=ST(YOC=YOT

Other points Only 1 RHP exemption can be claimed

As many AL can be purchased for claiming exemp-tion

As many speci-fied asset can be purchased for claiming exemp-tion

Only 1 RHP exemption can be claimed

As many asset can be purchased for claiming exemp-tion

Page 19 of 44

Cost Inflation Index1981-82 100 1990-91 182 1999-00 389 2008-09 5821982-83 109 1991-92 199 2000-01 406 2009-10 6321983-84 116 1992-93 223 2001-02 426 2010-11 7111984-85 125 1993-94 244 2002-03 447 2011-12 7851985-86 133 1994-95 259 2003-04 463 2012-13 8521986-87 140 1995-96 281 2004-05 480 2013-14 9391987-88 150 1996-97 305 2005-06 497 2014-15 10241988-89 161 1997-98 331 2006-07 519 2015-16 10811989-90 172 1998-99 351 2007-08 551

Page 20 of 44

8Income from Other Sources

Section 56 to 59

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Sections Particulars Provisions

56 Charge56(1)

Any income which is not charged under the first 4 head is charged under the head ‘Income from Other Sources‘. E.g.Director’s, MP’s, MLA’s, salary

Rent from vacant land.

Income from sub letting.

InterestRoyalty

56(2)Following incomes are always charged under the ‘OS‘Gifts Dividend Lottery income Rent of Plant

57Amount expressly allowed as deduction.

Expenditure should be incurred wholly and exclusively for earning S 56 income. E.g. (a) Interest on loan taken for purchase of bond. (b) Collection charges. (c) Contribution towards PF.

58 Restriction on deduction.

Following deductions are not allowed. E.g. Expenses incurred in earning lottery income.

59 Deemed income As per S 41. (Refer PGBP)

S 56(2). GIFTSPart A Part B Part C

Nature of gift Cash Gift Land & Building on or after 1-10-2009

JAD PB SAS on or after 1-10-2009

Donor Any person Any person Any personDonee Ind / HUF Ind / HUF Ind / HUFConsideration Nil Nil or inadequate consideration Nil or inadequate considerationIn excess of certain amount taxable in the year of receipt

Cash in excess of ₹ 50,000

in aggregate

is taxed u/h OS

(a) Stamp duty value exceeds ₹ 50,000 taxed

(a) FMV in excess of aggregate ₹ 50,000 taxed

(b) Difference = (SDV – PP) in excess of ₹ 50,000

taxed

(b) Difference = (FMV – PP) in excess of aggregate

₹ 50,000 taxedExceptions to Part A, B & C1. Gifts received from any relative. 2. Gifts received on the marriage of the individual.3. Gifts received under a will or

inheritance.4. Gifts received in contemplation of death of the payer.

5. Money received from local authority.

6. Money received from a registered charitable institute.

7. Money received from any fund, foundation, university, other educational institution, medical institution.

S 56(2). Relative

Page 21 of 44

Other Incomes charged under the head other sources1. Life insurance maturity proceeds if premium

for any year exceeds 10% of assured amount.2. Family pension less (1/3rd or ₹ 15,000 which-

ever is lower).3. Owning & maintaining race horses. 4. Letting of plant & machinery.5. Composite letting of building + P & M. 6. Lottery income. No deduction.7. Maturity proceeds of keyman insurance policy. Maturity amount received by Charged under the head

• Assessee ‘Business’ S 28• Employee ‘Salary’ S 17(3)• Legal heir on death of employee ‘Other Sources’ S 56(1)

Interest on SecuritiesSecurities held as

Stock in Trade

Interest charged under the head Business. S 28 to 44D.

S 37. Interest on loan & collection charges to run business is al-lowed as deduction.

Investment Interest charged under the head Other Sources. S 56 to 59.

S 57. Interest on loan & collection charges allowed as deduction.

S 10(15). Following interest exempt from tax.Post office scheme

Full exemption

(a) Cash Certificates (b) Fixed deposit (c) Cumulative time deposit account (CTD).

Note : Interest on Monthly scheme is not exempt interest is fully taxable.Partial

exemption(d) Saving account

Single upto ₹ 3,500 exemptJoint upto ₹ 7,000 exempt

Interest on Govt. Securities

(a) Interest on RBI Relief bonds. Interest on other Govt. Securities are fully taxable under the head Other Sources.(b) Interest on Gold Bonds.

S 10(4) Interest on Non Resident External Account is fully exempt from tax.

DividendSecurities

held asStock in Trade Dividend always charged

under the head Other Sources. S 56 to 59.

from Indian Company from foreign Company

Exempt u/s 10(34) TaxableInvestmentS 57. Interest on loan & collection charges allowed as deduction if dividend is taxable.Interim Dividend : Taxable in the year of receipt. Final Dividend : Taxable in the year of declaration.S 10(35). Income from units of mutual fund is exempt from tax.

Assessee

Other than above persons are not

relative

Page 22 of 44

9Clubbing of Income

Section 60 to 65

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Section 60Transfer of income without transfer of assets: Clubbed in the hands of transferrer.

Section 64(1)(ii), (iv) & (vii). Clubbing provisions relating to SpouseS 64(1)(ii)Remunerationto Spouse

Condition : Remuneration received by spouse shall be clubbed in the hands of that individual who has substantial interest in a concern. If both husband and wife is having substantial interest in a concern then remuneration shall be clubbed in the hands of that spouse whose total income excluding the remuneration to be clubbed is greater.No clubbing: If spouse possess knowledge or experience and remuneration is attributable to such knowledge or experience then remuneration is not clubbed.Substantial Interest : A person has substantial interest if he along with relatives holds atleast 20% voting power or 20% Profits in a concern.S 2(41). Relative :Lineal ascendant & Descendant

SpouseBrotherSister

Lineal ascendant-->

FatherMotherGrand fatherGrand mother

Lineal descendant-->

SonDaughterGrand sonGrand daughter

S 64(1)(iv)Asset transferred to spouse

Condition1. Asset transferred by individual to his or her spouse, 2. without adequate consideration 3. then income arising to spouse from the transferred asset shall

be clubbed in the hands of transferrer.

Applicable : Clubbing provision shall be applicable only when marriage subsist both at the time of transfer of asset & at the time when income arises.

Exception : Where the asset is transferred with an agreement to live apart then clubbing provision is not applicable.

S 64(1)(vii)Asset transferred to for the benefit of spouse

Condition1. Asset transferred by individual to any person or AOP, 2. without adequate consideration3. then income arising to spouse from the transferred asset shall

be clubbed in the hands of transferrer to the extent benefit arises to spouse.

Section 64(1)(vi) & (viii). Clubbing provisions relating to Son’s WifeS 64(1)(vi)Asset transferred to son’s wife.

Condition1. Asset transferred by individual to his or her son’s

wife, 2. without adequate consideration3. then income arising to son’s wife from the transferred

asset shall be clubbed in the hands of transferrer.

Applicable if :

Father in Law & Daughter in LawMother in Law & Daughter in Lawrelationship subsists both at the time of transfer of asset & at the

time of accrual of income.S 64(1)(viii)Asset transferred to for the ben-efit of son’s wife

Condition1. Asset transferred by individual to person or AOP, 2. without adequate consideration3. then income arising to son’s wife from the transferred

asset shall be clubbed in the hands of transferrer to the extent benefit arises to son’s wife.

A transfers asset to Mrs. A. Mrs A transfer same asset to her son’s wife. The income arising to son’s wife shall be clubbed ?Genuine Transfer Fraud Transfer

Mrs. A Mr. A

Page 23 of 44

Section 64(1A). Clubbing provisions relating to minor childAll income accruing to minor child shall be clubbed in the hands of that parent whose total income excluding the income of the minor child is greater.

Exception :

1. Where the marriage of the parent do not subsist, the income of the minor child shall be clubbed in the hands of that parent who maintains the minor child in the relevant PY.

2. If once the income is included in the hands of father or mother it shall be be continued to be clubbed in the same hands unless AO do otherwise.

S 10(32). Exemption

upto ₹ 1,500 per child exemption to that parent in whose hands income is clubbed.No clubbing from the date minor child attains majority.

• No clubbing if 1. Minor child is suffering from any disability specified u/s 80U. All income shall not be clubbed.

The income earned by minor child shall be taxable in their hands only. ROI shall be in their name and signed by guardian.

2. Minor child has earned any income from his own skill or talent. Only income earned through talent shall not be clubbed remaining income shall be clubbed.

Other Points. Spouse / Son’s Wife Minor Child

1. Income from transferred asset is to be clubbed. Correct Correct2. Income from income cannot be clubbed. Correct Wrong3. Income from accretion of asset cannot be clubbed. Correct Wrong4. All income is clubbed No only income from the

transferred asset is clubbedYes all income is

clubbed.

Page 24 of 44

10Set off & Carry Forward of Losses

Section 70 to 80

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S 70. Whether set off allowed within

same head?

S 71. Whether set off allowed with different head?

S 71B to 74ARules to carry forward & set off past year losses.

House Property

LossYes Yes

Section 71B.• Brought forward HP loss can be set off only with HP.• It can be carried forward for 8 AY’s.• Section 80 is not applicable. It means even if return of loss

is not filed or filed late loss can be carried forward & set off.

Business loss Yes Yes except

salary.

Section 72• Set off with both business income & speculation income.• Carry forward for 8AY.• Section 80 applicable. It means if return of loss is not filed

or filed late business loss cannot be carried forward.• Assessee who has incurred the loss can only set off that loss

[6 exception]• Even if business is discontinued business loss can be set off.

Specula-tion loss (Same

day sale & pur-

chase i.e. without taking

delivery) S 43(5)

Yes No

Section 73

• Past year speculation loss can be set off only with specula-tion income.

• Carry forward for 4AY.• Section 80 applicable. It means if return of loss is not filed

or filed late speculation loss cannot be carried forward.• Assessee who has incurred the loss can only set off that loss

[exception not applicable]• Even if business is discontinued business loss can be set off.

Loss under

the head capital gain

YesLT can be set off only with LT. ST

can be set off with both LT & ST.

No

Section 74• LT can be set off only with LT. ST can be set off with both

LT & ST.• Carry forward for 8AY.• Section 80 applicable. It means if return of loss is not filed

or filed late capital gain (loss) cannot be carried forward.Loss from activity of owning & maintain-ing race horses

Yes No

Section 74A• Past year horse loss can be set off only with horse income.• Carry forward for 4 AY.• Section 80 applicable. It means if return of loss is not filed

or filed late business loss cannot be carried forward.• Assessee who has incurred the loss can only set off that loss

[exception not applicable]• If business is discontinued then loss cannot be set off.

Loss from lotteries

etc

No No NoNote: No other loss can be set off against this income. Deduction u/s 57 not available. Deduction u/s 80C to 80U not available. Basic exemption not available. Flat rate 30%.

Other losses

Yes Yes NoIn case of choice this loss should be set off first since it cannot be carried forward.

Page 25 of 44

S 32(1) S 32(2)Current year depreciation Unabsorbed depreciation

Rules to set off unabsorbed depreciation1. The unabsorbed depreciation can be set off with any head’s of income except casual income and salary

income. But it shall be first set off with Business Income then with any other income. Do note that current year depreciation can be set off only with business income if cannot be set off then it shall be carried forward which becomes unabsorbed depreciation.

2. The unabsorbed depreciation can be carried forward for unlimited period.3. Section 80 is not applicable. It means even if return of loss is not filed or filed late loss can be carried

forward & set off.4. Even if business is discontinued business loss can be set off.5. Assessee who has incurred the loss can only set off that loss [6 exception]

Rules to set off the losses Priority to set off the losses1. First S 71, then S 72 and then adjust past year losses. 1. Current year depreciation u/s 32(1).2. Income exempted u/s 10 cannot be set off with tax-

able income.2. Brought forward business loss u/s 72.

3. It is mandatory to set off the loss. 3. Unabsorbed depreciation u/s 32(2)

Exceptions to the rule that assessee who has incurred the loss can only set off that loss. This exception is applicable only to S 72 & S 32(2).1. 72A. Accumulated business loss of amalgamating company can be carried forward and set off by

amalgamated company.2. 72A. Accumulated business loss of demerged company can be carried forward and set off by resulting

company.3. 72A. Conversion of sole proprietorship concern into a company.4. 72A. Conversion of firm into a company.5. 72A. Conversion of Pvt. limited Company to LLP or Unlisted Company to LLP. (Limited Liability

Partnership).6. 78(2). Losses of business acquired on inheritance. Father dies and son inherits the business then son can

set off the business loss.

S 71B S 72 S 73 S 74 S 74A S 32(2)HP loss Business

lossSpeculation

lossCapital

gain lossHorse race

lossUnabsorbed

dep1. Set off under which head Same

HeadSame Head

Same Head Same Head

Same Head Any Head

2. Carry forward for how many years

8 AY 8 AY 4 AY 8 AY 4 AY unlimited period

3. Section 80 NA A A A A NA4. Should business be

continued to set off the loss

NA No No NA Yes No

5. The assessee who has incurred the loss can only set of that loss (True or False)

NA True True NA True True

6. Any exceptions NA Yes No NA No Yes

Page 26 of 44

11Deduction from GTI

Section 80C to 80U

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Section Assessee Nature of payment Amount of dedn Other Points80C

SpecifiedSaving & Expendi-ture

Contribu-tion to LIP, PF, NSC, ELSS etc

Ind / HUF

Resident/Non resident

Indian / Foreign Citizen

1. LIP for self, spouse & child. (max 10% of assured amount). Maturity amount exempt if (a) premium for all years do not exceed 10% of assured amount. (b) on death. Other-wise taxable u/h other sources.

Combined Maximum deduction u/s 80C + 80CCC + 80CCD (only EE’s contribution) ₹ 1,50,000

1. Payment out of loan or exempted income deduction allowed.

2. ULIP 8. All PF (SPF, RPF, PPF, ASAF) except URPF.3. FD for 5 years

2. Deduction is allowed in the FY of payment.

4. ELSS 5. NSC 9. Tuition fees in India (max 2 child) (formal school/univer-sity/college)

6. Infrastructure shares / bonds

10. Investment in Sukanya Samriddhi Scheme

7. Pension funds of MF 11. Repayment of housing loan

Section Assessee Nature of payment Amount of Deduction Other Points80CCC

Pension fund

IndR/NRIC/FC

Contribution to Pension Fund of insurance companies. (Annuity scheme or any other Pension Plan)

Combined Maximum deduction u/s 80C + 80CCC + 80CCD (only EE’s contribution) ₹ 1,50,000

Payment should be made out of taxable income.

Section Assessee Nature of payment Amount of Deduction Other Points80CCD

Pension fund - NPS

IndR/NRIC/FC

Contribution to Pension Fund set up by CG. (New Pension Scheme)

ER : max 10% SAS for ER (no limit of ₹ 1,50,000) + EE : max 10% of SAS for EE (limited to ₹ 1,50,000)but


An additional deduction of upto ₹ 50,000 over and above ₹ 1,500,00 is allowed to an individual .

Section Assessee Nature of payment Amount of Deduction Other Points80D

Health Insurance Premium

Ind / HUF R/ NRIC/FC

Contribution to health insurance premium & for preventive health check up.

Self, Spouse & Dependent children

Parents (dependent / Not dependent)


Payment of premium in cash deduction not allowed.

Max 25,000. (Resident Senior Citizen

max ₹ 30,000)

Max 25,000. (Resident Senior Citizen max

₹ 30,000)Very senior citizen : Dedn of ₹ 30,000 is allowed in case of medical expenditure even if no insurance premium is paid.Contribution in CGHS scheme dedn

allowed. Over all deduction cannot exceed ₹ 25,000 / ₹ 30,000 / ₹ 50,000 / 55,000 or ₹ 60,000 as the case may be.

Preventive health check up max ₹ 5,000 even if payment is made in cash.

Preventive health check up max ₹ 5,000 even even if payment is made in cash.

Section Assessee Nature of expenses Amount of Deduction Other Points

Page 27 of 44

80DD

Disabled dependent

Only resident Ind / HUF

IC/FC

Maintenance + normal medical treatment of dependent person with disability.

Spouse & children Brothers, Sisters & Parents Certificate of disability by Govt. Doctor is furnished.

Double benefit of 80DD & 80U not available.

wholly or mainly dependent on such individual for his support and maintenance and is not dependent on any

other person for his support and maintenanceNormal disability (atleast 40%) Fixed ₹ 75,000

Severe disability (atleast 80%) Fixed ₹ 1,25,000

Section Assessee Nature of expenses Amount of Deduction Other Points80DDB

Medical treat-ment of specified disease

Only resident Ind / HUF

IC/FC

Medical treatment of specified disease.

Self, Spouse & children Brothers, Sisters & Parents Specified disease.Cancer, AIDS, Neurological disease etc

wholly or mainly dependent on such individual for his support and maintenance and is not dependent on any

other person for his support and maintenanceActual expenditure or ₹ 40,000 (in case of RSC take

₹ 60,000) whichever is lower less medical insurance is the amount of deduction.

Section Assessee Title Amount of Deduction Other Points80U

Disabled

Only resident Ind (IC/FC)

Assessee himself is disabled.

Normal disability (atleast 40%) Fixed ₹ 75,000 Double benefit of 80DD & 80U not available.Severe disability (atleast 80%) Fixed ₹ 1,25,000

Section Assessee Title Amount of Deduction Other Points80E

Interest on higher ed.

Ind (R/NR / IC/FC)

Interest on loan taken for higher education after + 2.

Any amount of interest is allowed as deduction for max 8 years. Repayment of loan is not allowed as deduction.

Loan is taken by ind for himself, spouse or for child.

Section Assessee Title Amount of Deduction Other Points80G

Donation

All assessee Donations Part A (Govt. fund) Part B (Private fund) Cash donationany amount

donated is eligible for deduction.

only 10% of AGTI is eligible for deduction. (AGTI = GTI–LTCG–STCG STT paid – all

deductions except 80G)

upto ₹ 10,000 allowedexcess of ₹ 10,000

not allowed

Part A fund Dedn allowedNational Defence Fund 100%Zila Saksharta Samiti 100%PM National Relief Fund 100%National Eminent University/Educational Institution

100%

National Children Fund 100%Jawaharlal Nehru Memorial Fund 50%PM Drought Relief Fund 50%Indira Gandhi Memorial Trust 50%Rajiv Gandhi Foundation 50%

Part B fund Dedn allowedDonation to Govt. / approved Local Authority, Institution, to be utilised.a. for promoting family planning 100%b. for charitable purpose other

than promoting family planning50%

Donation to any notified temple, mosque, gurudwara, church or other place for renovation or repair.

50%

Donation made by a company to the Indian Olympic association

100%

Part A fund added by FA 2015

1. The National Fund for Control of Drug Abuse. 100%2. Swachh Bharat Kosh. स्वच्छ भारत कोष 100%3. Clean Ganga Fund (Deduction allowed only to domestic donors) 100%

Section Assessee Condition Amount of Deduction (Least is deductible)

Page 28 of 44

80GG

Rent

Ind (R/NR / IC/FC)

Deduction for rent paid. M ₹ 2,000 p.m.F 25% of adjusted GTI F Rent Paid – 10% of adjusted GTI

Rent is paid to third person or to the ER.He is not in receipt of HRARent is not paid to HUF, spouse or his minor child.

Section Assessee Title Donation is made to Other Points80GGA

Donation for SR

All assessee not having business income

Donation for scientific research / rural development

1. Approved research association for research. Cash donation2. PSU / Local authority for eligible project or

scheme.upto ₹ 10,000

allowed

3. Institution for Rural development programme Corresponding section of PGBP is S 35, 35AC, 35CCA.

4. National Urban Poverty Eradication Fund / National Fund for Rural Development.

80GGB 80GGCApplicable to Indian Company All assessee Not applicable to Others Local authority & every artificial juridical

person wholly or partly funded by the Govt.Contribution to Political party or Electoral Trusts Political party or Electoral TrustsAmount of deduction 100% of contribution 100% of contributionCash donation any amount not allowed not allowed

Section Assessee Title Amount of Deduction Nature of income80JJA All assessee Profit from bio

degradable wastes100% of profits for consecutive 5 years from the year of start of business.

Collecting & processing or treating of biodegradable wastes for generating power or producing bio-fertilizer, bio-pesticides or bio-gas, for fuel or organic manure.

Section Assessee Title Amount of Dedn Nature of income80QQB / 80RRB

Resident Ind / HUF

Royalty from books / Patents

Amount of royalty or ₹ 3,00,000 whichever is lower

Books : Literary, Artistic or Scientific nature.Annual Royalty : cannot exceeds 15% of sales.

Lumpsum royalty : Any amount.

If royalty is earned outside India then it should be brought into India within 6 months from the end of FY (by 30th Sept.)

Section Assessee Title Nature of income Amount of Deduction80TTA Resident

Ind / HUFInterest on saving a/c.

Banks Max ₹ 10,000.

Deduction is not available on interest on fixed deposits. It is only on interest on saving.

Co-operative BanksLand Co-operative BanksPost office

Page 29 of 44

12Rates of Tax

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TAX ON TOTAL INCOMESpecial Income Casual Income Normal Income [NI = TI – SI – CI]

LTCG 20% flat Lottery Income etc 30% flat

Indian Company / Firm

Foreign Company

Ind / HUF / AOP / BOI

STCG STT 15% flat 30% flat 40% flat Slab rateBasic exemption allowed from SI if NI < BE. But 1st allowed

from NI & then from SI.Rebate u/s 87A is available.

Surcharge (Tax on Tax) See the last table

Education cess & SHEC 3% 3% 3%

Domestic Company

Foreign Company

Firm / LLP

Ind / HUF/ AOP / BOI / AJP

Local Authority

Co-opera-tive society

• Total Income exceeds ₹ 1 Cr. 7% 2% 12% 12% 12% 12%• Total Income exceeds ₹ 10 Cr. 12% 5% NA NA NA NA

SLAB RATEIncome Rate of Tax (Method 1) Amount of Tax (Method 2)

Upto ₹ 2,50,000 Nil Nil₹ 2,50,001 to 5,00,000 10% of (NI – 2,50,000) – upto ₹ 2,000 for

resident individual. S 87A10% of NI – 25,000 – upto ₹ 2,000

for resident individual. S 87A₹ 5,00,001 to 10,00,000 20% of (NI – 5,00,000) + 25,000 20% of NI – 75,000Exceeds ₹ 10,00,000 30% of (NI – 10,00,000) + 1,25,000 30% of NI – 1,75,000

TAX CONCESSIONPerson Age Basic Exemption Tax concession

1. Resident senior citizen atleast 60 years at any time during the relevant PY.

3,00,000 ₹ 5,000

2. Resident super senior citizen atleast 80 years at any time during the relevant PY.

5,00,000 ₹ 25,000

3. Woman (R / NR) less than 60 years 2,50,000 nil4. Non resident senior citizen /

super senior citizenAny age 2,50,000 nil

5. HUF / AOP / BOI / AJP NA 2,50,000 nil

Domestic Company

Foreign Company

Firm / LLP Individual / HUF / AOP / BOI / AJP

Tax on Long Term Capital Gain 20% flat 20% flat 20% flat 20% flatTax on Short Term Capital Gain (STT paid) 15% flat 15% flat 15% flat 15% flatTax on Lottery Income. (Casual Y) 30% flat 30% flat 30% flat 30% flatTax on Normal Income 30% flat 40% flat 30% flat slab rate with

rebate u/s 87A.

Sur-

char

ge • TI exceeds ₹ 1 Cr. and upto 10 Cr. 7% 2% 12% 12%• TI exceeds ₹ 10 Cr. 12% 5% NA NA

Whether marginal relief available Yes Yes Yes YesEducation cess & SHEC 3% 3% 3% 3%

Page 30 of 44

13Agricultural Income

Section 2(1A) & 10(1)

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Section 10(1). Agricultural Income is exempt from taxAgricultural income as defined under section 2(1A) is fully exempt from tax but with a rider. Since agricultural income is exempt from tax it doesn’t form part of total income. Also Constitution of India gives exclusive powers to the State Legislature to make laws with respect to taxes on agricultural income. (Entry No. 46 of State List)

Section 2(1A). Meaning of Agricultural Income(a) (b) (c)

Rent from agricultural land situated in India used for

agricultural purpose

Growing of crops from land situated in India. Also saplings in a nursery.

Rent from building situated in the immediate vicinity of

agricultural land situated in India and used for agricultural purpose

and not situated in urban area.Exception : If let out for purpose other than agriculture then NAI

Basic operation

Yes Yes No

Subsequent operation

Yes No Yes

Whether AI? Yes Yes NoComputation u/h Other Sources Computation u/h Business Computation u/h House Property

S 56 to 59 S 28 to 44D S 22 to 27Rent xxx Sale of crops xxx GAV xxxLess : taxes on land xxx Less : all business expenses xxx Less : MT xxxLess : Collection charges xxx

• Salary NAV xxx• Irrigation expenses Less : SD xxx

OS AI xxx • Depreciation Less : Interest xxxBI AI xxx HP AI xxx

Computation of income which is partly agricultural & partly non agriculturalAI NAI

Rule 7A Manufacture of rubber. 65% 35%Rule 7B(1) Sale of coffee grown and cured by seller. 75% 25%Rule 7B(1A) Sale of coffee grown, cured, roasted and grounded by seller in India

with or without mixing chicory or other flavouring ingredients.60% 40%

Rule 8 Growing and manufacturing tea in India. 60% 40%

Computation of tax if assessee is earning both AI & NAI (Partial Integration)1. The assessee is an Individual or HUF or BOI, or AOP

or artificial juridical person. Computation of tax

Tax on (NAI + AI) at slab rate ALess : Tax on (AI + BE) at slab rate (B)Tax A– B

2. Non-agricultural income i.e normal income exceeds basic exemption.

3. Agricultural Income exceeds ₹ 5,000.

Page 31 of 44

14Assessment of Firm

Section 184, 28, 37, 40b

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Section 184. Assessment of firmCompulsory clauses Optional agreement

1. There is written agreement amongst partners. (Partnership Deed : PD)

1. Interest on loan or capital contributed partners.

2. Profit sharing ration (PSR) is specified in PD. 2. Remuneration payable to partners.3. PD is filed with tax department with first ROI. If conditions of S 184 satisfied then interest and

remuneration to partners is allowed as deduction in the hands of firm and taxable in the hands of partners u/h PGBP

All the above 3 points satisfied then a Firm is created. Once created always assessed as Firm.

Rate of tax of firm : 30% flat + Surcharge if any + education cess @ 3%

Section 40b. Maximum deduction of interest & remuneration allowed in the hands of FirmInterest Remuneration to working partner

upto 12% p.a. or rate of interest

specified in PD

whichever is lower.

Remuneration to working partner as specified in PD or remuneration as per following table whichever is lower.

Book Profit LimitFirst ₹ 3,00,000 ₹ 1,50,000 or 90% of book profit whichever is more

Balance 60%Remuneration should be distributed in remuneration ratio.

Computation of Book ProfitNet profit as per P & L A/c after making all adjustments u/ss 28 to 44D except S 40b ALess : Interest allowed to partners under section 40b (B)Book profit C

Page 32 of 44

15Charitable Trusts

Section 2(15), 11 to 12AA

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S 2(15). Meaning of charitable purposeRelief to the poor

Education Medical Relief

Preservation of Yoga Advancement of object of gen-eral public utilityenvironment monuments

Exception No exception any amount charged or not charged activities shall be treated as charitable purpose.

If amount from specified activity

is upto 25% of total receipts -->

Charitable

exceeds 25% of total receipts-->

Non Charitable

S 11 & 12. Income of charitable purposeIncome of property held under trusts xxxLess : 15% statutory deduction (xxx)Less : Income accumulated (xxx) Max period of accumulation : 5 years. Less : Income not received (xxx) To be applied in the year of receipt or by next year.Less : Income received in last moment (xxx) To be applied by next year.Less : Income applied (xxx)Income of charitable trust. xxx

Section 12AA. Registration of TrustsApplication to whom? CITWhen should application may be made for registration?

At any time after the creation of trust.

What CIT shall check before it grants registration?

He shall satisfy himself about the objects of the trust or institution and the genuineness of its activities.

By what time CIT shall grant registra-tion?

He shall grant registration within 6 month after the expiry of month of application.

What if CIT neither grant registration nor refuses registration within 6 month.

Registration shall be deemed to be granted.

What is the effective date of registration. 1st April of the year in which registration is granted.

Tax Treatment of Anonymous donationWholly charitable Wholly religious Trusts Both charitable & religious trust

Anonymous donation whether taxable?

Yes No Only specific donation that such donation is for any university / educational institution /medical institution.

Anonymous donation xxxLess : 5% of total donation or 1,00,000 whichever is higher xxxTaxable anonymous donation (Flat 30%) xxx

Page 33 of 44

16 Tax Deducted at Source

Section 192 to 206C

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Sec-tion

Nature of payment

Tax Deductor When to deduct tax at source

Basic Rate of TDS No TDS upto base amount

192 Salary Employer Payment (P) Slab rate + Ed cess Basic exemptionOther Points

Employee can give all other income details to his employer on which tax shall be deducted. However employee cannot provide detail of losses of other heads. But he can provide losses under the head house property which the employer shall adjust while computing TDS.

193 Interest on securities Company or Govt.

Payment or credit whichever date is earlier (PCD)

10% ₹ 5,000 (listed / unlisted | ind/ huf | acc payee cheque)

No TDS also on followings

1. DEMAT securities. Tax free securities

2. Central / State Govt. securities. Tax free securities

3. Interest on Gold Deposit Bonds since exempt u/s 10(15).

4. Zero Coupon Bonds. Tax free securities

194 Dividend u/s 2(22)(e) Loan / advance

Closely held company

Payment (P) 10% nil10(34)

194A Other interest All person ex-cept ind/ HUF*

Payment or credit whichever date is earlier (PCD)

10% ₹ 10,000 paid by Bank / Post Office₹ 5,000 other Interest

No TDS also on followings

1. Interest to banks.

2. Interest paid by firm to its partners.

3. Exempted interest u/s 10(15)

4. Interest from micro banks.

194B Winning from Lottery/crossword puzzles

Any person Payment (P) 30% ₹ 10,000

194BB Winning from horse race

Any person Payment (P) 30% ₹ 5,000

194C Payment to contrac-tor. Works / labour contract : Advt, Ca-tering, TV, Transport-ers, Job Work.

All person except ind/ HUF*

Payment or credit which ever date is earlier (PCD)

Firm / D. Co 2% Single : 30,000.Aggregate : 75,000.Personal contract : No TDS

Ind / HUF 1%44AE Truck + PAN

nil

No PAN 20%What is job work

Essential condition : Material is supplied by client. TDS only on labour contract. But if indi-visible bill is generated for both material and labour then TDS on both labour and material.

194D Insurance commission

Any person Payment or credit which ever date is earlier (PCD)

Domestic Co. 20% ₹ 20,000

Ind /HUF/ Firm 10%

194DA Life insurance maturity proceeds

Any person Payment (P) 2% upto ₹ 1,00,000

194G Commission on sale of lottery tickets

Any person Payment or credit which ever date is earlier (PCD)

10% ₹ 1,000

194H Commission or brokerage other than share brokerage.

All person ex-cept ind/ HUF*


10% ₹ 5,000

Examples : 1. Order procurement 2. Guarantee commission

3. Recruitment commission

4. Property dealer commission

Page 34 of 44

194I Rent All person ex-cept ind/ HUF*


P & M 2% ₹ 1,80,000.Rent paid to Govt / Local authority / RBI

Building & Furniture

10%

194IA TDS on transfer of land & building other than agricultural land

Any person (buyer)

Payment or credit which ever date is earlier (PC)

1% less than ₹ 50,00,000

194J Professional / technical fees / Roy-alty / Non competing fees / Director fees.

All person ex-cept ind/ HUF*


10% ₹ 30,000 for each income except di-rector fees where base amount is nil

194LA Compensation on compulsory acquisition of L & B.

Govt Payment (P) 10% ₹ 2,00,000

195 Any sum except sal-ary to Non-resident or to a foreign company

Any person Payment or credit which ever date is earlier (PC)

Rate of TDS the amount of tax payable by NR in India.**

10(34)

* PY 13-14 PY 14-15Turnover exceeds ₹ 1 Crore / 25 Lakhs TDS is required to be deducted by Ind / HUF

** Surcharge and education cess as applicable shall be added to basic rate for deduction of tax at source.

WHETHER SURCHARGE AND EDUCATION CESS TO BE ADDED TO BASIC RATE OF TDS

Any payment to Payment to resident forForeign Company (R / NR) Other

Non ResidentSalaries Other

PaymentsSurcharge @ 2% if payment > 1 cr but

do not exceed 10 Cr.@ 12% if

payment > 1 cr@ 12% if

taxable salary > 1 cr

Not added@ 5% if payment > 10 cr

Education cess & SHEC 3% 3% 3% Not added

PROCEDURE

Section 197 Section 197ATitle Certificate of TDS at lower deduction or

nil rate.Declaration of nil deduction of tax.

Issued by Assessing Officer AssesseeApplication by Assessee on its own.Income All kinds of incomes which are subjected

to TDSOnly interest income subjected to TDS u/s 193,194A and 194DA.

Condition for application

If assessee is of the opinion that his final income tax amount shall be lower than tax to be deducted.

For ind / HUF For senior citizenIf interest < Basic

exemption &Tax on TI is nil.

If interest > Basic exemption but tax on

TI is nil.

198 Since tax is deducted from income therefore tax deducted is treated as assessee’s income. Gross Income = Income (net of TDS) + amount of TDS

199 The tax deducted at source shall be treated as tax paid in PY which shall be adjusted from final tax computed in AY. Tax computed in AY – Tax paid in PY = Self assessment tax.

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200 Due date of deposit of TDS with Govt. TDS return S 203. TDS certificateApril 7th May Aug 7th Sep Dec 7th Jan AMJ 15th July AMJ 30th JulyMay 7th June Sept 7th Oct Jan 7th Feb JAS 15th Oct JAS 30th OctJune 7th Jul Oct 7th Nov Feb 7th Mar OND 15th Jan OND 30th JanJuly 7th Aug Nov 7th Dec Mar 30th Apr JFM 15th May JFM 30th May

E filing / E payment compulsory Form 16 (others)/ 16A (Salary)200A

1.Correction in TDS return if there is arithmetical errors, error in rate of TDS, wrong deduction of tax then intimation shall be sent to assessee for correct deposit of TDS alongwith interest.

2. Intimation shall be sent within a period of 1 year from the end of the financial year in which statement was filed.

201 Consequences of not deduction of tax at source or deducted but not deposited with the Govt.a. Interest @ 1% p.m. / 1.5% p.m. b. Penalty : Max tax

in arrearsc. In PGBP these expenses shall not allowed as deduction

203 TDS certificate should be furnished quarterly within 15 days of deposit of tax. Tax deductor shall provide Unique Transaction Number to payee. It is proof of deposit of TDS with the Govt.

203A Tax Deduction & Collection Account No. TDCAN should be applied in Form No 49B by every assessee who is required to deduct tax at source. This TDCAN should be quoted in every challan, return & in every correspondence with income tax department.

203AA Annual tax statement in Form No 26AS should be issued in E-Mail by NSDL to every assessee whose tax has been deducted at source by any tax deductor.

206AA If assessee do not furnishes PAN to the tax deductor then tax deductor shall deduct tax at source at following higher rates.a. Basic rate of TDS /

TDS at slab rate PAN should be quoted in all declaration and application.Wrong quotation of PAN shall also entail higher deduction of tax.

b. 20%

Grossing up of income

Gross income =Amount (net of TDS) --------------------------

100 – rate of TDS

Mr. Taxcrazy receives interest on listed debentures of ₹ 9,000 (net of TDS). Find out the gross interest which is included in his income. Ans : 10,000

No TDS on amount of service tax

Page 36 of 44

17Advance Tax

Section 207 to 211

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Section 207. Liability to pay advance taxWhat is advance tax The tax which is required to be paid in AY but is paid in PY is called advance tax.Is advance tax payable on all income.

Yes, advance tax is payable on all income whether it can be estimated or not. In case of that income which cannot be estimated like LTCG, STCG STT paid, Gifts advance tax is required to be paid in the same PY in which it arises.

Section 208. When does liability to pay advance tax arise.Who is required to pay advance tax?

Every person.

When a person is required to pay advance tax?

If his estimated advance tax after deduction of TDS exceeds ₹ 10,000.

Any exceptions ? Yes. 2 exceptionsException 1 Exception 2. All conditions should be satisfied.Assessee claiming income under section 44AD or 44AE (presumptive basis of taxation) is not required to pay advance tax.

1. Person is resident individual aged atleast 60 years.

2. Such individual is not earning any business income.

Section 209. Computation of advance taxEstimate gross total income 10,00,000Less: Estimated deduction u/s 80C to 80U (1,00,000)Estimated total income 9,00,000Tax on the estimated total income 2,00,000Add: Surcharge if applicable 20,000Tax and surcharge 2,20,000Add: Education cess 6,600Tax liability 2,26,600Less: Relief u/s 89 26,600Tax 2,00,000Less: Tax deducted at source and collected at source 1,90,000Advance tax payable 10,000

Section 211. Due date of payment of advance taxCorporate Assessee Non-Corporate Assessee

• By 15th June 15% Nil• By 15th September 45% 30%• By 15th December 75% 60%• By 15th March 100% 100%

Section 234C. Deferment in payment of advance taxDue date Advance Tax to be paid (a) Advance tax paid (b) Shortfall Interest

By 15th June 15% If advance tax paid is atleast 12% then interest is nil

(a) – (b) 1% of shortfall x 3

By 15th September 45% If advance tax paid is atleast 36% then interest is nil

(a) – (b) 1% of shortfall x 3

By 15th December 75% no relaxation (a) – (b) 1% of shortfall x 3By 15th March 100% no relaxation (a) – (b) 1% of shortfall x 1

Page 37 of 44

18Interest payable by assessee

Section 234A, B & C

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234A 234B 234CNature of default ROI not filed by DD Advance tax < 90% of

assessed tax.Advance tax not paid in

timeDefault period Due date to filing date 1-4 to assessment date Payment after 15th quarter

3 3 3 1Tax due Assessed tax – TDS –

Ad. TaxAssessed tax – TDS –

Ad. TaxReturned tax – TDS –

Ad. Tax

Page 38 of 44

19Return of Income

Section 139, 140, 140A

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S 139(1). Who should file the return of incomeIndividual / HUF / AOP / BOI / AJP Company / Firm

If GTI exceeds basic exemption then they should file the ROI.

They should file ROI irrespective of income or loss. Irrespective whether business has started or not. As soon as the company is incorporated or partnership deed is signed they are required to file ROI.

Person [Explanation to Section 139(1)] Last day of filing of ROI1. Any person who is required to file transfer pricing audit report. 30th - 11 of AY12. A company. 30th - 9 of AY13. A person (other than a company) whose accounts are required to be audited under any

LAW (Audit is compulsory u/s 44AB, Section 11, 12 or 13A etc).30th - 9 of AY1

4. A working partner of a firm whose a/cs are required to be audited under any LAW. 30th - 9 of AY15. In case of any other assessee. (Salary, HP, Capital Gain or Income from other sources) 31st - 7 of AY1

S 142(1). Compulsory filing of return of income.1. Can AO issue notice to assessee for filing of ROI? Yes2. Is assessee bound to file ROI u/s 142(1)? Yes, even if his TI is less than basic exemption.3. What is the time limit of filing of ROI? As specified in the notice4. When can notice u/s 142(1) be issued? At any time after due date or after AY1

S 139(3). Loss return?1. Is it compulsory to file loss

return?Yes, if assessee wishes to carry forward the losses. For Company / Firm it is compulsory to file ROI whether loss or profit.

2. What is the time limit of filing loss return?

Loss return should be filed on or before the due date of filing of return i.e. on or before 30-9 or 31-7 then only loss can be carried forward and set off.

3. Consequences if loss return is not filed in time?

Following losses cannot be carried forward ?(a) Business loss (b) Speculation loss (c) Capital gain loss (d) Loss from activity of owning & maintaining race horses.

Following loss can be carried forward & set off even if loss return is not filed.(a) Loss from house property & (b) Unaborsbed depreciation

4. What if loss return is filed in time as specified in S 142(1)?

Loss cannot be carried forward since loss return is filed after due date.

S 139(4). Belated Return1. What is belated return? The return which is not filed in time. i.e. the return which is filed after due date of

filing of return u/s 139(1) or filed after time specified in notice u/s 142(1).2. What is the time limit of

filing belated return?It should be filed by AY2 or before the completion of best judgement assessment order whichever date is earlier.

3. Consequences of filing of belated return?

a. The losses mentioned u/s 139(3) is not allowed to be carried forward.b. Belated return cannot be revised.c. Liable for payment of interest u/s 234A.d. Penalty can be levied u/s 271F.

S 139(5). Revised Return1. Why the return should be

revised?The return is revised if there is any mistake in the original return. Mistakes are of 2 types. (a) Wrong statement. (b) Omission.

2. Which return can be revised? Only original return can be revised. The return which is filed in time as per S 139(1) or u/s 142(1) is called original return.

3. What is the time limit of filing revised return?

It should be filed by AY2 or before the completion of assessment (Best judgement assessment or scrutiny assessment) whichever date is earlier.

Page 39 of 44

4. Consequences of filing of revised return?

A revised return substitutes the original return from the date original return is filed.

5. Other points? a. A belated return cannot be revised. b. A revised return can further be revised if filed in time allowed.

S 140. Signing of return.

Indi-vidual

a. in general. by the individual himself.b. If he is absent from India. By any person who holds a valid power of attorney.c. where he is mentally incapacitated. By his guardian.d. for any other reason. By any person who holds a valid power of attorney.

HUF a. in general. by Kartab. If he is absent from India. Any member of the family not being a minor

Company a. in general. Managing Director.b. If MD is not able to sign or where there is no MD Any Directorc. A Non-resident company. A person who holds valid power of attorney. e. Company in process of being wound up. Liquidator of company.f. Where the mgt of Co. is taken over by the Govt. The principal officer.

Firm a. in general. Managing Partner.b. where managing partner is not able to sign. Any Partner

LLP a. in general. Designated Partner.b. where designated partner is not able to sign. Any Partner

SECTION 140A. SELF-ASSESSMENT TAXTax on TI (Returned Tax) xxxLess : Advance tax (xxx)Less : Tax Deducted at Source (xxx)Less : Relief u/s 89 (Salary relief) (xxx)Less : Relief u/s 90, 90A, 91 (DTAA) (xxx)Less : Tax credit u/s 115JAA (MAT credit) (xxx)Self Assessment Tax xxxOther PointsWhat is the time limit of payment of SAT? Before furnishings the return of incomeIs proof required to be attached with the return? Yes. CIN. Challan Identification Number.What if tax paid is less than SAT? The amount so paid shall be first adjusted towards interest and

then balance towards tax.

SECTION 139A. PERMANENT ACCOUNT NUMBER (PAN)What is PAN? It is permanent account number allotted by assessing officer for the purpose of identification.

Its number contains 10 digit both numeral and alphabet.Who should apply? Every person who is required to file return of income. Apply in Form No 49A.No PAN for whom? Non Resident Charitable Trusts Person earning only agricultural IncomeCompulsory quotation of PAN?

On all returns. Motor Vehicle Land & Building exceeds ₹ 5,00,000

Jewellery exceeds ₹ 5,00,000Bank account

exceeds ₹ 50,000Hotel bill exceeds ₹ 25,000. Shares

What if PAN not quoted

Section 272B : Penalty ₹ 10,000 Higher deduction of tax at source.

E payment & E filing compulsory forCompany Every other person if they are required to get their accounts audited u/s 44AB.

Page 40 of 44

20Whole Income Tax

Preview

Don’t Settle




2nd revision


3rd revision

4th revision

Heads Salary House Property PGBP Capital Gain Other SourcesSections 15 to 17 22 to 27 28 to 44D 45 to 55A 56 to 59Nature of Income (Chargeability)

15 22 28 45 56ER & EE

relationshipAnnual value of

buildingProfit on sale of

SITProfit on transfer of capital asset

If income is not charged under first

4 headIn which year income is recognisedto tax (Taxable event)

Due or receipt whichever

matures earlier

Annual Value Method of accounting

followed by the assessee (145)

In the year of transfer

Method of accounting followed by the assessee (145)

Nature of expenses

Only specified expenses are allowed as

deduction which are only 2 PT + EA


deduction which are only 3

MT + SD + Int

Expenditure incurred for the purpose

of business or profession.

(many expenses)


deduction which are only 3

COA + COI + TE

Expenditure incurred for the purpose of

earning such income (many expenses)

Computation of Income. Exempted income specified u/s 10 do not form part of TI

17 – 16 23 – 24 + 25AA + 25B

28 – (30 to 36 + 37) subject to

section 40 to 43B (restriction)

FVC xx 56 – 57 subject to 58 (restriction)(–) COA xx

(–) COI xx(–) TE xxCG xx

Rates of Tax Normal Income Normal Income Normal Income • LTCG • STCG

STT

STCG Lottery TV

games etc

Other income

Normal Income : Ind / HUF slab rateCompany Flat 30% / 40%

Special Income

Normal Income

Casual Income

Normal Income

LTCG 20%STCG STT 15%Causal Income 30% flat

Set off and carry forward of losses

No losses arises Can be set off with any head of

income

Can be set off with any head of income except

salary (Spec Loss only with SP)

LT with LTST with both ST

and LT

Can be set off with any head of income.

However lottery losses cannot be set off with any heads.

Page 41 of 44

21Mixed Topics

Never stop learning




2nd revision


3rd revision

4th revision

Salary for different purposeEntertainment allowance Basic SalaryGratuity covered Basic salary + 100% of DAGratuity others SAS. Average of last 10 months preceding the month of retiringLeave Salary SAS Average of last 10 month preceding the date of retirementHRA SASAccommodation Basic Salary+ DA () + Any commission + taxable allowances80CCD SAS

Members of household Family Members Relative

Both the above words are used in Chapter Salary. Relative word is used in 3 chapters. PGBP, Other Sources & Clubbing of Income.

Section 2(41). Meaning of Relative

Box 1 Box 2 Box 3Self, Spouse & children

Brother & Sister

Lineal ascendent Father, mother, grandfather, grandmotherLineal descendent Son, Daughter, Grandson, Granddaughter

The above definition of relative is used in following 2 placesPGBP Section 40A(2) Payment made to relativesClubbing of income Section 64(1)(ii) Remuneration to spouse from a concern in which such

individual has substantial interest.

Section 56(2). Meaning of relative with respect to that person who is receiving gift

Assessee

Other than above persons are not

relative

A person receiving gifts from above person is not taxable.

Meaning of relative at different placesIncome from Salaries

Medical facilities Spouse, children (dependant or not dependant), Parents, brothers, sisters

wholly and mainly dependent on such individual.Leave Travel Concession.Other Perquisites. Rule 3

Members of Household

Self, spouse, children and their spouses, parents, servants and dependants.

Page 42 of 44

PGBP Payment to specified persons. S 2(41)

Relative, partner, director, or person having a substantial interest or relative of any such person. Relative means spouse, brother, sister or any lineal ascendant or descendant of such individual.

Other Sources

Gifts, S 56(2)

(i) Spouse of the individual, (ii) Brother or sister of the individual, (iii) Brother or sister of the spouse of the individual, (iv) Brother or sister of either of the parents of the individual, (v) Any lineal ascendant or descendant of the individual, (vi) Any lineal ascendant or descendant of the spouse of individual. (vii) Spouse of a person referred to in items (ii) to (vi)

Clubbing of Income

Substantial interest.

S 2(41). Relative means spouse, brother, sister or any lineal ascendant or descendant of such individual.

Deduction u/s

80C to 80U

80C Ind : LIP on life of self, spouse and children

HUF : any member of HUF

80D Ind : Self, Spouse & dependant children.

Parents (dependant or not dependant)


80DD, 80DDB

Individual, Spouse & children

Parents, brothers and sisters wholly and mainly dependent on such individual


80E Self, Spouse, children of individualCharitable Trusts

S 11 Interested person. Relative is as defined in S 56(2).

Interest and Deposits 10(15) Deduction u/s 80C to 80U TDS1. Interest on NSC VIII

issue.No Interest Yes u/s 80C No since tax free.

Deposit Yes u/s 80C2. Interest on saving bank No Interest Yes u/s 80TTA Yes u/s 194A if

interest exceeds ₹ 10,000.

Deposit No

3. Interest on FD for 5 years in Bank.

No Interest No Yes u/s 194A if interest exceeds ₹ 10,000.

Deposit Yes u/s 80C

4. Interest on FD for 5 years in post office / under CTD scheme.

Deposit Yes u/s 80C

5. Interest on saving in post office

Yes (Single : upto ₹ 3,500) (Joint upto

₹ 7,000)

Interest Yes u/s 80TTA Yes u/s 194A if interest exceeds ₹ 10,000.

Deposit No

6. Interest on Post Office Monthly Income Scheme

No Interest No Yes u/s 194A if interest exceeds ₹ 10,000.Deposit No

Professional tax paid by ER on behalf of EE Professional tax is first added to GS and then deduction is allowed u/s 16(iii)

Entertainment allowance Entertainment allowance is first added to GS and then deduction is allowed u/s 16(ii)

LIP payable by ER on behalf of EE LIP payable by ER is first added in Gross Salary on due basis and then deduction is allowed u/s 80C on paid basis.

ER’s contribution to New Pension Scheme ER’s contribution first added to gross salary and then deduction allowed u/s 80CCD.

Yes Interest No Yes u/s 194A if interest exceeds ₹ 10,000.

Page 43 of 44

Exempted Income Income is not a part of total income. All exempted incomes are in section 10.Deduction of income Income is taxable income it is first added and then deduction is allowed u/s 80C

to 80U.

Section 27 Section 64(1A)Minor married daughter

Income from house property taxed in the hands of minor married daughter itself.

All other income of minor married daughter shall be clubbed in the hands of either of the parents whose total income excluding the income of the minor child is greater.

Donation in cashSection 80G : Donation / 80GGA : Donation for SR upto ₹ 10,000 Allowed

excess of ₹ 10,000 not allowedSection 80GGB / 80GGC : Political party donation any amount not allowed as deduction

Following deductions are allowed on paid basisProfessional Tax Municipal Tax Certain payments like IDT, Interest to

banks, Retirement benefits to employeesS 16(iii) S 23 S 43B

allowed is paid in relevant PY either by ER or EE.

allowed is paid in relevant PY if paid by owner.

allowed if paid on or before due date of furnishing of return.

S 2(32) S 10(32)Substantial Interest Exemption to parent if income minor child is clubbed.

Depreciation ratesin Salary chapter in PGBP chapter

Computer or electronic items Computer of software50% 60%

Limit to number of childChildren Education allowance & Hostel

Allowance

Education facility

Leave Travel Concession Clubbing of income

Tuition Fees

Limit of upto 2 child to claim exemption.

No limit on number of

child

Limit 2 number of child. First child if twins then second child shall be counted as third child.

First child if single and second child twin then twin shall be

counted as one.

No limit on number

of child for claim

exemption.

Limit of upto 2 child

S 10(14) S 17(2) S 10(5) S 10(32) 80C

Double deduction not available of the followingStamp Duty Depreciation

Once in S 80C and next in Capital gain Once in PGBP and next in Capital Gain

Difference betweenGold Bonds issued under Gold Deposit Scheme 1999 Gold

On sale of gold bonds capital gain do not arise since not treated as capital asset.

On sale of gold capital gain arises since treated as capital asset.

Interest is available and exempted u/s 10(15) No interestGold bonds are as good as gold. Purchase and sale at

the price of gold.

Page 44 of 44

INCOME tax

aMENdMENt

MadE by

fINaNCE aCt 2015

Page 1 of 10

RESIdENtIaL StatUS

aMENdMENt tO tHE CONdItIONS fOR dEtERMINING RESIdENCy StatUS IN RE-SPECt Of COMPaNIESThe existing provisions of section 6 of the Act provides for the conditions under which a person can be said to be resident in India for a previous year. In respect of a person being a company the conditions are contained in section 6(3) of the Act. Under the said clause, a company is said to be resident in India in any previous year, if-

(i) it is an Indian company; or(ii) during that year, the control and management of its affairs is situated wholly in India.

Due to the requirement that whole of control and management should be situated in India and that too for whole of the year, the condition has been rendered to be practically inapplicable. A company can easily avoid becoming a resident by simply holding a board meeting outside India. This facilitates creation of shell compa-nies which are incorporated outside but controlled from India. ‘Place of effective management’ (POEM) is an internationally recognized concept for determination of residence of a company incorporated in a foreign juris-diction. Most of the tax treaties entered into by India recognise the concept of ‘place of effective management’ for determination of residence of a company as a tie-breaker rule for avoidance of double taxation. Many coun-tries prefer the POEM test to be appropriate test for determination of residence of a company. The principle of POEM is recognized and accepted by Organisation of Economic Cooperation and Development (OECD) also. The OECD commentary on model convention provides definition of place of effective management to mean the place where key management and commercial decisions that are necessary for the conduct of the entity’s busi-ness as a whole, are, in substance, made.The modification in the condition of residence in respect of company by including the concept of effective management would align the provisions of the Act with the Double Taxation Avoidance Agreements (DTAAs) entered into by India with other countries and would also be in line with international standards. It would also be a measure to deal with cases of creation of shell companies outside India but being controlled and managed from India.In view of the above, it is proposed to amend the provisions of section 6 to provide that a person being a com-pany shall be said to be resident in India in any previous year, if-

(i) it is an Indian company; or(ii) its place of effective management, at any time in that year, is in India .

Further, it is proposed to define the place of effective management to mean a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance made.Since POEM is an internationally well accepted concept, there are well recognised guiding principles for deter-mination of POEM although it is a fact dependent exercise. However, it is proposed that in due course, a set of guiding principles to be followed in determination of POEM would be issued for the benefit of the taxpayers as well as, tax administration.These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assess-ment year 2016-17 and subsequent assessment years.

dEdUCtION U/S 80C tO 80Utax bENEfItS UNdER SECtION 80C fOR tHE GIRL CHILd UNdER tHE SUKaNya SaM-RIddHI aCCOUNt SCHEMEPursuant to the Budget announcement in July 2014, a special small savings instrument for the welfare of the girl child has been introduced under the Sukanya Samriddhi Account Rules, 2014. The following tax benefits have been envisaged in the Sukanya Samriddhi Account scheme:-

(i) The investments made in the Sukanya Samriddhi Account scheme 2014 will be eligible for deduction under section 80C of the Act.

(ii) The interest accruing on deposits in such account will be exempt from income tax u/s 10(11A).

Page 2 of 10

(iii) The withdrawal from the said scheme in accordance with the rules of the said scheme will be exempt from tax u/s 10(11A).

Accordingly, a new clause (11A) is proposed to be inserted in section 10 of the Act so as to provide that any payment from an account opened in accordance with the Sukanya Samriddhi Account Rules, 2014 shall not be included in the total income of the assessee. As a result, the interest accruing on deposits in, and withdrawals from any account under the scheme would be exempt.The Scheme has been notified under clause (viii) of sub-section (2) of section 80C vide Notification number 9/2015 S.O.210 (E),F.No. 178/3/2015-ITA-I dated 21.012015.With a view to allow the deduction under section 80C to the parent or legal guardian of the girl child, amend-ment of section 80C of the Act is proposed to be made so as to provide that a sum paid or deposited during the year in the Scheme in the name of any girl child of the individual or in the name of any girl child for whom such individual is the legal guardian, would be eligible for deduction under section 80C of the Act.These amendments will take effect retrospectively from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years.

aMENdMENt IN SECtION 80d RELatING tO dEdUCtION IN RESPECt Of HEaLtH IN-SURaNCE PREMIaThe existing provisions contained in section 80D, inter alia, provide for deduction of

a) upto ₹ 15,000 to an assessee, being an individual in respect of health insurance premia, paid by any mode, other than cash, to effect or to keep in force an insurance on the health of the assessee or his fam-ily or any contribution made to the Central Government Health Scheme or any other notified scheme or any payment made on account of preventive health check up of the assessee or his family; and

b) an additional deduction of upto ₹ 15,000 is provided to an individual assessee to effect or to keep in force insurance on the health of the parent or parents of the assessee.

c) A similar deduction is also available to a Hindu undivided family (HUF) in respect of health insurance premia, paid by any mode, other than cash, to effect or to keep in force insurance on the health of any member of the HUF. The section also presently provides for a deduction of twenty thousand rupees in both the cases if the person insured is a senior citizen of sixty years of age or above.

d) The quantum of deduction allowed under Section 80D to individuals and HUF in respect of premium paid for health insurance had been fixed vide Finance Act, 2008 at Rs.15000/- and Rs. 20,000/- (for senior citizens).

In view of continuous rise in the cost of medical expenditure, it is proposed to amend section 80D so as to raise the limit of deduction from upto ₹ 15,000 to upto ₹ 25,000 . It is further proposed to raise the limit of deduction for senior citizens from upto ₹ 20,000 to upto ₹ 30,000.Further, very senior citizens are often unable to get health insurance coverage and are therefore unable to take tax benefit under section 80D. Accordingly, as a welfare measure towards very senior citizens ,it is also proposed to provide that any payment made on account of medical expenditure in respect of a very senior citizen, if no payment has been made to keep in force an insurance on the health of such person, as does not exceed upto ₹ 30,000 shall be allowed as deduction under section 80D. The aggregate deduction avail-able to any individual in respect of health insurance premia and the medical expenditure incurred would how-ever be limited to upto ₹ 30,000. Similarly aggregate deduction for health insurance premia and medical expenditure incurred in respect of par-ents would be limited to upto ₹ 30,000.It is also proposed to define a ‘very senior citizen’ to mean an individual resident in India who is of the age of 80 years or more at any time during the relevant previous year.Example:

Individual ParentsHealth insurance of individual Health insurance of Mother Medical expenditure of father

(atleast 80 years)

Page 3 of 10

₹ 21,000 ₹ 15,000 ₹ 18,000Limited to ₹ 20,000 Limited to ₹ 30,000

Deduction u/s 80D limited to 51,000

These amendments will take effect from the 1st April, 2016 and will, accordingly, apply in relation to the assess-ment year 2016-17 and subsequent assessment years.

Earlier w.e.f. ay 16-171. 15,000 + 20,000 25,000 + 30,000

Also one can claim deduction of medical expenditure incurred in respect of very senior citizen aged atleast 80 years of ₹ 30,000 even if no insurance premium is paid.

RaISING tHE LIMIt Of dEdUCtION UNdER SECtION 80ddbUnder the existing provisions of section 80DDB of the Act, an assessee, resident in India is allowed a deduction of a sum not exceeding ₹ 40,000, being the amount actually paid, for the medical treatment of certain chronic and protracted diseases such as Cancer, full blown AIDS, Thalassaemia, Haemophilia etc. This deduction is al-lowed up to ₹ 60,000 where the expenditure is in respect of a senior citizen i.e. a person who is of the age of 60 years or more at any time during the relevant previous year.The above deduction is available to an individual for medical expenditure incurred on himself or a dependant relative. It is also available to a Hindu undivided family (HUF) for such expenditure incurred on its members. Dependant in case of an individual means the spouse, children, parents, brother or sister of an individual and in case of an HUF means a member of the HUF ,wholly or mainly dependant on such individual or HUF for his support and maintenance.Under the existing provisions of this section, a certificate in the prescribed form, from a neurologist, an oncolo-gist, a urologist, a haematologist, an immunologist or such other specialist working in a Government hospital is required. It has been represented that the requirement of a certificate from a doctor working in a Govern-ment hospital causes undue hardship to the persons intending to claim the aforesaid deduction .Govern-ment hospitals at many places do not have doctors specialising in the above branches of medicine. for this and other reasons, it may be difficult for the taxpayer to obtain a certificate from a Government hospital.In view of the above, it is proposed to amend section 80DDB so as to provide that the assessee will be required to obtain a prescription form a specialist doctor for the purpose of availing this deduction.Further, it is also proposed to amend section 80DDB to provide for a higher limit of deduction of upto ₹ 80,000, for the expenditure incurred in respect of the medical treatment of a “very senior citizen”. A “very senior citi-zen” is proposed to be defined as an individual resident in India who is of the age of 80 years or more at any time during the relevant previous year.These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assess-ment year 2016-17 and subsequent assessment years.

Earlier w.e.f. ay 16-17Individual ₹ 40,000 ₹ 40,000Senior citizen ₹ 60,000 ₹ 60,000A very senior citizen NA ₹ 80,000Certificate From Govt. doctor only Now from any specialist doctor

RaISING tHE LIMIt Of dEdUCtION UNdER SECtION 80dd aNd 80U fOR PERSONS WItH dISabILIty aNd SEVERE dISabILItyThe existing provisions of section 80DD, inter alia, provide for a deduction to an individual or HUF, who is a resident in India, who has incurred—

(a) Expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability as defined under the said section; or

Page 4 of 10

(b) paid any amount to LIC or any other insurer in respect of a scheme for the maintenance of a disabled dependant.

The section presently provides for a deduction of ₹ 50,000 if the dependant is suffering from disability and ₹ 1,00,000 if the dependant is suffering from severe disability (as defined under the said section).The existing provisions of section 80U, inter alia, provide for a deduction to an individual, being a resident, who, at any time during the previous year, is certified by the medical authority to be a person with disability (as defined under the said section).The said section provides for a deduction of ₹ 50,000 if the person is suffering from disability and ₹ 1,00,000 if the person is suffering from severe disability (as defined under the said section).The limits under section 80DD and section 80U in respect of a person with disability were fixed at ₹ 50,000 by Finance Act, 2003. Further, the limit under section 80DD and section 80U in respect of a person with severe disability was last enhanced from ₹ 75,000 to ₹ 1,00,000 by Finance (No.2) Act, 2009.In view of the rising cost of medical care and special needs of a disabled person, it is proposed to amend section 80DD and section 80U so as to raise the limit of deduction in respect of a person with disability from ₹ 50,000 to ₹ 75,000.It is further proposed to amend the section so as to raise the limit of deduction in respect of a person with severe disability from ₹ 1,00,000 to ₹ 1,25,000.These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assess-ment year 2016-17 and subsequent assessment years.

Earlier w.e.f. ay 16-17Normal Disability ₹ 50,000 ₹ 75,000Severe Disability ₹ 1,00,000 ₹ 1,25,000

RaISING tHE LIMIt Of dEdUCtION UNdER 80CCCUnder the existing provisions contained in sub-section (1) of the section 80CCC, an assessee, being an individu-al is allowed a deduction upto ₹ 1,00,000 in the computation of his total income, of an amount paid or deposited by him to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India or any other insurer for receiving pension from a fund set up under a pension scheme.In order to promote social security, it is proposed to amend sub-section (1) of the said section so as to raise the limit of deduction under section 80CCC from ₹ 1,00,000 to ₹ 1,50,000, within the overall limit provided in sec-tion 80CCE.This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

Earlier w.e.f. ay 16-17Deduction u/s 80CCC ₹ 1,00,000 ₹ 1,50,000

addItIONaL dEdUCtION UNdER 80CCdUnder the existing provisions contained in sub-section (1) of section 80CCD of the Income-tax Act, 1961 if an individual,employed by the Central Government on or after 1st January, 2004, or being an individual employed by any other employer, or any other assessee being an individual has paid or deposited any amount in a previ-ous year in his account under a notified pension scheme, a deduction of such amount not exceeding 10%. of his salary in the case of an employee and 10% of the gross total income in case of any other individual is allowed. Similarly, the contribution made by the Central Government or any other employer to the said account of the individual under the pension scheme is also allowed as deduction under sub-section (2) of section 80CCD, to the extent it does not exceed 10% of the salary of the individual in the previous year. Sub-section (1A) of section 80CCD provides that the amount of deduction under sub-section (1) shall not exceed ₹ 1,00,000. Till date, under section 80CCD, only the National Pension System (NPS) has been notified by the Ministry of Finance. With a view to encourage people to contribute towards NPS, it is proposed to omit sub-section (1A).In addition to the enhancement of the limit under section 80CCD(1), it is further proposed to insert a new sub-

Page 5 of 10

section (1B) so as to provide for an additional deduction in respect of any amount paid, of upto ₹ 50,000 for contributions made by any individual assessees under the NPS.Consequential amendments are also proposed in sub-section (3) and sub-section (4) of section 80CCD.These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assess-ment year 2016-17 and subsequent assessment years.

Earlier w.e.f. ay 16-17Deduction u/s 80CCD ₹ 1,00,000 ₹ 1,50,000

100% dEdUCtION fOR NatIONaL fUNd fOR CONtROL Of dRUG abUSEUnder the existing provisions of section 80G, an assessee is allowed a deduction from his total income in respect of donations made by him to certain funds and charitable institutions. The deduction is allowed at the rate of 100% of the amount of donations made to certain funds and institutions formed for a social purpose of national importance, like the Prime Ministers’ National Relief Fund, National Foundation for Communal Harmony etc.the National fund for Control of drug abuse is a fund created by the Government of India in the year 1989, under the Narcotic Drugs and Psychotropic Substances Act, 1985. Since National Fund for Control of Drug Abuse is also a Fund of national importance, it is proposed amend sec-tion 80G so as to provide 100% deduction in respect of donations made to the said National Fund for Control of Drug Abuse.This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

Earlier ay 16-17National Fund for Control of Drug Abuse whether covered u/s 80G

Not covered Covered and eligible for 100% deduction u/s 80G

tax bENEfItS fOR SWaCHH bHaRat KOSH aNd CLEaN GaNGa fUNdUnder the existing provisions of section 80G of the Income-tax Act, a deduction is allowed in computing the total income of a person in respect of donations made to certain funds and charitable institutions. The deduction is allowed at the rate of 50% of the amount of donations made except in the case of donations made to certain funds and institutions formed for a social purpose of national importance, where it is allowed at the rate of 100%, such as the National Defence Fund set up by the Central Government, the Prime Minister’s National Relief Fund, the Prime Minister’s Armenia Earthquake Relief Fund, the Africa (Public Contributions-India) Fund, the National Children’s Fund, the National Foundation for Communal Harmony etc.“Swachh bharat Kosh” has been set up by the Central Government to mobilize resources for improving sanitation facilities in rural and urban areas and school premises through the Swachh bharat abhiyan. Similarly, Clean Ganga fund has been established by the Central Government to attract voluntary contribu-tions to rejuvenate river Ganga.With a view to encourage and enhance people’s participation in the national effort to improve sanitation facili-ties and rejuvenation of river Ganga, it is proposed to amend section 80G of the Act so as to incentivise dona-tions to the two funds. It is proposed to provide that donations made by any donor to the Swachh bharat Kosh and donations made by domestic donors to Clean Ganga fund will be eligible for a deduction of 100% from the total income. However, any sum spent in pursuance of Corporate Social Responsibility under sub-section (5) of section 135 of the Companies Act, 2013, will not be eligible for deduction from the total income of the donor.The existing provisions of section 10(23C) of the Act provide for exemption from tax in respect of the income of certain charitable funds or institutions like the Prime Minister’s National Relief Fund ; the Prime Minister’s Fund (Promotion of Folk Art); the Prime Minister’s Aid to Students Fund; the National Foundation for Com-munal Harmony. Considering the importance of Swachh Bharat Kosh and Clean Ganga Fund, it is also proposed to amend section 10(23C) of the Act so as to exempt the income of Swachh Bharat Kosh and Clean Ganga Fund from income-tax.These amendments will take effect retrospectively from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years.

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Earlier ay 15-16Donations made by any donor to the Swachh bharat Kosh


Donations made by domestic donors to Clean Ganga fund


tdS

ENabLING Of fILING Of fORM 15G/15H fOR PayMENt MadE UNdER LIfE INSUR-aNCE POLICyThe Finance Act, 2014, inserted section 194DA in the Act with effect from 1.10.2014 to provide for deduction of tax at source at the rate of 2% from payments made under life insurance policy, which are chargeable to tax. It has been further provided that no deduction shall be made if the aggregate amount of payment during a financial year is less than Rs. 1,00,000. In spite of providing high threshold for deduction of tax under this section, there may be cases where the tax payable on recipient’s total income, including the payment made under life insurance, will be nil. The exist-ing provisions of section 197A of the Act inter alia provide that tax shall not be deducted, if the recipient of the certain payment on which tax is deductible furnishes to the payer a self-declaration in prescribed Form No.15G/15H declaring that the tax on his estimated total income of the relevant previous year would be nil. It is, therefore, proposed to amend the provisions of section 197A for making the recipients of payments referred to in section 194DA also eligible for filing self-declaration in Form No.15G/15H for non-deduc-tion of tax at source in accordance with the provisions of section 197a.This amendment will take effect from 1st June, 2015.

Earlier w.e.f. 1-6-2015Section 197A covered S 193 and S 194A S 193, S 194A and S 194DA

CLaRIfICatION REGaRdING dEdUCtION Of tax fROM PayMENtS MadE tO tRaNS-PORtERSUnder the existing provisions of section 194C of the Act payment to contractors is subject to tax deduction at source (TDS) at the rate of 1% in case the payee is an individual or Hindu undivided family and at the rate of 2% in case of other payees if such payment exceeds Rs. 30,000 or aggregate of such payment in a financial year ex-ceeds Rs. 75,000. Prior to 1.10.2009, section 194C of the Act provided for exemption from TDS to an individual transporter who did not own more than two goods carriage at any time during the previous year. Subsequently, Finance Act, 2009 substituted section 194C of the Act with effect from 1.10.2009, which inter alia provided for non- deduction of tax from payments made to the contractor during the course of plying, hiring and leasing goods carriage if the contractor furnishes his Permanent Account Number (PAN) to the payer.The memorandum explaining the provisions of Finance Bill, 2009 indicates that the intention was to exempt only small transport operators (as defined in section 44AE of the Act) from the purview of TDS on furnishing of Permanent Account Number (PAN). Thus, the intention was to reduce the compliance burden on the small transporters. However, the current language of sub-section (6) of section 194C of the Act does not convey the desired intention and as a result all transporters, irrespective of their size, are claiming exemption from TDS under the existing provisions of sub-section (6) of section 194C of the Act on furnishing of PAN.As there is no rationale for exempting payment to all transporters, irrespective of their size, from the purview of TDS, it is proposed to amend the provisions of section 194C of the Act to expressly provide that the relax-ation under sub-section (6 ) of section 194C of the Act from non-deduction of tax shall only be applicable to the payment in the nature of transport charges (whether paid by a person engaged in the business of transport or otherwise) made to an contractor who is engaged in the business of transport i.e. plying, hiring or leasing goods carriage and who is eligible to compute income as per the provisions of section 44AE of the Act (i.e a person who is not owning more than 10 goods carriage at any time during the previous year) and who has also furnished a declaration to this effect along with his PAN.This amendment will take effect from 1st June, 2015.

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RatIONaLISatION Of PROVISIONS RELatING tO dEdUCtION Of tax ON INtERESt (OtHER tHaN INtERESt ON SECURItIES)Section 194A(1) read with section 194A(3)(i) of the Act provide for deduction of tax on interest (other than in-terest on securities) over a specified threshold, i.e. Rs.10,000 for interest payment by banks, co-operative society engaged in banking business (co-operative bank) and post office and Rs.5,000 for payment of interest by other persons. Further, sub-section (3) of section 194A inter alia also provides for exemption from deduction of tax in respect of following interest payments by co-operative society:

(i) Interest payment by a co-operative society to a member thereof or any other co-operative society. [Section 194A(3)(v) of the Act]

(ii) Interest payments on deposits by a primary agricultural credit society or primary credit society or co-operative land mortgage bank or co-operative land development bank. [Section 194A(3)(viia)(a) of the Act]

(iii) Interest payment on deposits other than time deposit by a co-operative society engaged in the business of banking other than those mentioned in section 194A(3)(viia)(a) of the Act. [Section 194A(3)(viia)(b) of the Act]

Therefore, as per the provisions of section 194A(1) read with provisions of sections 194A(3)(i)(b) and 194A(3)(viia)(b), co-operative bank is required to deduct tax from interest payment on time deposits if the amount of such payment exceeds specified threshold of Rs.10,000/-. However, as the provisions of section 194A(3)(v) of the Act provide a general exemption from making tax deduction from payment of interest by all co-operative societies to its members, the co-operative banks tried to avail this exemption by making their depositors as members of different categories. This has led to dispute as to whether the co-operative banks, for which the specific provisions of tax deduction exist in the form of section 194A (1), section 194A(3)(i)(b) and section 194A(3)(viia)(b) of the Act, can take the benefit of general exemp-tion provided to all co-operative societies from deduction of tax on payment of interest to members. The matter has been carried to judicial forums and in some cases a view has been taken that the provisions of section 194A(3)(viia)(b) of the Act makes no distinction between members and non-members of co-operative banks for the purposes of deduction of tax, hence, the co-operative banks are required to deduct tax on payment of interest on time deposit and cannot avoid the same by taking the plea of the general exemption provided under section 194A(3)(v) of the Act. This is because the specific provision of tax deduction provided under section 194A(3)(i)(b) and 194A(3)(viia)(b) of the Act for co-operative banks override the general exemption provided to all co-operative societies for non-deduction of tax from interest payment to members under section 194A(3)(v) of the Act.As there is no difference in the functioning of the co-operative banks and other commercial banks, the Finance Act, 2006 and Finance Act, 2007 amended the provisions of the Act to provide for co-operative banks a taxation regime which is similar to that for the other commercial banks. Therefore, there is no rationale for treating the co-operative banks differently from other commercial banks in the matter of deduction of tax and allowing them to avail the exemption meant for smaller credit co-operative societies formed for the benefit of small number of members. However, as mentioned earlier, a doubt has been created regarding the applicabil-ity of the specific provisions mandating deduction of tax from the payment of interest on time deposits by the co-operative banks to its members by claiming that general exemption provided is also applicable for payment of interest to member depositors. In view of this, it is proposed to amend the provisions of the section 194A of the Act to expressly provide from the prospective date of 1st June, 2015 that the exemption provided from deduction of tax from payment of interest to members by a co-operative society under section 194A(3)(v) ) of the Act shall not apply to the payment of interest on time deposits by the co-operative banks to its members.However, the existing exemption provided under section 194A(3)(viia)(a) of the Act to primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co-operative land develop-ment bank from deduction of tax in respect of interest paid on deposit shall continue to apply. Therefore, these co-operative credit societies/banks referred to in said clause (viia)(a) would not be required to deduct tax on interest payment to depositors even after the proposed amendment. Further, the existing exemption provided under section 194A(3)(v) of the Act from deduction of tax from interest paid by a cooperative society to another

Page 8 of 10

co-operative society shall continue to apply to the co-operative bank and, therefore, a co-operative bank shall not be required to deduct tax from the payment of interest on time deposit to a depositor, being a co-operative society.The existing provision of TDS on payment of interest by banking company or co-operative bank applies only to the interest payment on time deposits made on or after the 1st day of July, 1995. The definition of “time de-posits” provided in the section 194A of the Act excludes recurring deposit from its scope. Therefore, payment of interest on recurring deposits by banking company or co-operative bank is currently not subject to TDS. The recurring deposit is also made for a fixed tenure and, therefore, the same is akin to time deposit. It is, therefore, proposed to amend the definition of ‘time deposits’ so as to include recurring deposits within its scope for the purposes of deduction of tax under section 194A of the Act. However, the existing threshold limit of Rs 10,000 for non-deduction of tax shall also be applicable in case of interest payment on recurring deposits to safeguard interests of small depositors.Currently, provisions of proviso to section 194A(3)(i) of the Act provide that the interest income for the purpose of deduction of tax by the banking company or the co-operative bank or the public company shall be computed with reference to a branch of these entities. As currently, most of these entities are computerised and follow core banking solutions for crediting interest, there is no rationale for continuing branch wise calculation of interest by the entities who have adopted core banking solutions. It is, therefore, proposed to amend the provisions of section 194A of the Act to provide that the computation of interest income for the purposes of deduc-tion of tax under section 194A of the Act should be made with reference to the income credited or paid by the banking company or the co-operative bank or the public company which has adopted core banking solutions.Under section 194A(3)(ix) of the Act, tax is not required to be deducted from the interest credited or paid on the compensation amount awarded by the Motor Accident Claim Tribunal if the amount of such interest credited or paid during a financial year doesnot exceed Rs.50,000/-. Finance (No.2) Act, 2009 amended the provisions of section 56 of the Act as well as substituted section 145A of the Act to, inter alia, provide that interest income received on compensation or enhanced compensation shall be deemed to be the income of the year in which the same has been received. However, the existing provisions of section 194A of the Act provides for deduction of tax from interest paid or credited on compensation, whichever is earlier. Section 145A (b) of the Act provides an exception to method of accounting contained in section 145 of the Act and mandates for taxation of interest on compensation on receipt basis only. Therefore, deduction of tax on such interest on mercantile/accrual basis results into undue hardship and mismatch. It is, therefore, proposed to amend the provisions of section 194A of the Income-tax Act, 1961 to provide that deduction of tax under section 194A of the act from interest payment on the compensation amount awarded by the Motor accident Claim tribunal compensation shall be made only at the time of payment, if the amount of such payment or aggregate amount of such payments during a financial year exceeds Rs.50,000/-.These amendments will take effect from 1st June, 2015.

CHaRItabLE tRUSt

RatIONaLISatION Of dEfINItION Of CHaRItabLE PURPOSE IN tHE INCOME-tax aCt

Law The primary condition for grant of exemption to a trust or institution under section 11 of the Act is that the income derived from property held under trust should be applied for charitable purposes in India. ‘Charitable purpose’ is defined in section 2(15) of the Act. The section, inter alia, provides that advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. However, this restriction shall not apply if the aggregate value of the receipts from the activi-ties referred above is ₹ 25 lakh or less in the previous year.

Page 9 of 10

Logicof amendment

The institutions which, as part of genuine charitable activities, undertake activities like pub-lishing books or holding program on yoga or other programs as part of actual carrying out of the objects which are of charitable nature are being put to hardship due to first and second proviso to section 2(15).the activity of yoga has been one of the focus areas in the present times and interna-tional recognition has also been granted to it by the United Nations. Therefore, it is proposed to include ‘yoga’ as a specific category in the definition of charitable purpose on the lines of education.In so far as the advancement of any other object of general public utility is concerned, there is a need is to ensure appropriate balance being drawn between the object of preventing busi-ness activity in the garb of charity and at the same time protecting the activities undertaken by the genuine organization as part of actual carrying out of the primary purpose of the trust or institution.

Now theamendment

It is, therefore, proposed to amend the definition of charitable purpose to provide that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless,-

(i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and

(ii) the aggregate receipts from such activity or activities, during the previous year, do not exceed 25% of the total receipts, of the trust or institution undertaking such activity or activities, for the previous year .

These amendments will take effect from 1st April, 2016 and will, accordingly, apply in rela-tion to the assessment year 2016-17 and subsequent assessment years.

SURCHaRGE

domestic Company

foreign Company

firm / LLP

Ind / HUf/ aOP / bOI /

aJP

Local authority

Co-operative

society• Total Income exceeds ₹ 1 Cr 7% 2% 12% 12% 12% 12%

• Total Income exceeds ₹ 10 Cr. 12% 5% NA NA NA NA

Mat 7% 20.389%Mat 12% 21.342%ddt• Basic Rate• Effective rate

17.304%20.925%

Page 10 of 10

and

common chapteRs

amendment

made by

finance act 2015

excise, customsccR

Page 1 of 11

excise act 1944standaRd Rate of excise duty

old Rate upto 28-2-2015 new Rate w.e.f 1-3-201512% + 3% = 12.36% 12.5% (No education cess is added)

GeneRaL penaLty RuLe 25 W.e.f 14-5-2015Minimum General penalty under rule 25 increased from ₹ 2,000 to ₹ 5,000.

fine foR Late fiLinG of RetuRn W.e.f 1-3-2015

Rule 12It lays down filing of return [ER-1, ER-3, ER-8] or Annual Financial Information Statement [ER-4] or Annual Installed Capacity Statement [ER-7].

Rule 17Rule 17 governs the provisions in relation to removal of goods from 100% EOU to Domestic Tariff Area.Rule 17(3) requires the 100% EOU unit to electronically submit a monthly return in form ER 2 within 10 days from the close of the month to which the return relates, in respect of excisable goods manufactured in, and receipt of inputs and capital goods in, the unit.

Rule 12(6) / Rule 17(6)Delay in filing of above return shall attract a late fee of ₹ 100 per day for each day of default subject to a maximum of ₹ 20,000.

onLine appLication foR centRaL excise ReGistRation W.e.f 1-3-2015

(i) Application for registration:

Every person shall get himself registered with the jurisdictional Deputy or Assistant Commissioner of Central Excise by applying in the form provided for registration in the website www.aces.gov.in

(ii) Registration of different premises of the same registered person:

If the person has more than one premises requiring registration, separate registration certificate shall be obtained for each of such premises. However, if a person manufactures or carries on trade in goods falling under Chapter 50 to 63 (textile articles) of First Schedule to the Central Excise Tariff Act, 1985 and has more than one premises requiring registration, he may obtain a single registration for all such premises, which fall within the jurisdiction of one Commissioner of Central Excise provided he declares the details of all such premises in the specified form.Also, if a person manufactures Compressed Natural Gas (Tariff item 2711 of Central Excise Tariff) and has more than one premises requiring registration, which fall within the jurisdiction of one Chief Commissioner of Central Excise, he may obtain a single registration for all such premises with any of the Commissioner of Central Excise falling within the jurisdiction of the said Chief Commissioner. He will have to submit the details of all such premises along with the application for registration, subject to the condition that prior intimation shall be given before starting any additional premises subsequent to obtaining such registration

(iii) Online filing of application:

Application for registration or de-registration or amendment of the registration application shall be filed only online on the website www.aces.gov.in, in the forms provided in the website.

Page 2 of 11

(iv) PAN based Registration:

Applicant for registration shall mandatorily quote Permanent Account Number (PAN) of the proprietor or the legal entity being registered in the specified column in the application form, failing which registration will not be granted. Government Departments are exempt from the requirement of quoting the PAN in their online application.

(v) Applicant to quote e-mail address and mobile number

Applicant shall quote his e-mail address and mobile number in the requisite column of the application form for communication with the Department.

Business Transaction Numbers:

Business transaction numbers obtained from other Government departments or agencies such as Customs Registration No (BIN No), Import Export Code (IEC) Number, State Sales Tax /(VAT) Number, Central Sales Tax Number, Company Index Number (CIN), Service Tax Registration Number, which have been issued prior to the filing of Central Excise Registration application, shall be filled in the form and for the numbers subsequently obtained, the application shall be amended.

(vi) Registration Number and Certificate

Pending post-facto verification of premises and documents by the authorized Officers, registration application shall be approved by the Deputy or Assistant Commissioner within 2 days of the receipt of duly completed online application form. A Registration Certificate containing registration number shall be issued online and a printed copy of such Registration Certificate shall be adequate proof of registration and the signature of the issuing authority is not required on the said Registration Certificate.

(vii) Submission of documents:

The applicant shall tender self attested copies of the following documents at the time of verification of the premises:

(a) Plan of the factory premises;(b) Copy of the PAN Card of the proprietor or the legal entity registered;(c) Photograph and Proof of the identity of the applicant;(d) Documents to establish possession of the premises to be registered;(e) Bank account details;(f) Memorandum or Articles of Association and List of Directors; and(g) Authorization by the Board of Directors or Partners or Proprietor for

filing the application by a third party.

(viii) Physical verification:

The authorized officer shall verify the premises physically within 7 days from the date of receipt of application through online. Where errors are noticed during the verification process or any clarification is required, the authorized Officer shall immediately intimate the same to the assessee for rectification of the error within 15 days of the receipt of intimation failing which the registration shall stand cancelled. The assessee shall be given a reasonable opportunity to represent his case against the proposed cancellation, and if it is found that the reasons given by the assessee are reasonable, the authorized Officer shall not cancel the registration to the premises.On the physical verification of the premises, if it is found to be non-existent, the registration shall stand cancelled. The assessee shall be given a reason opportunity to represent his case against the proposed cancellation, and if it is found that the reasons given by the assessee are reasonable, the authorized Officer shall not cancel the registration to the premises recording the complete and correct address.

(ix) Transfer of Business or acquisition of factory:

Where a registered person transfers his business to another person, the transferee shall get himself registered afresh. Where an applicant has acquired an old factory from a Bank or a Financial Institution, he shall get himself registered afresh.

Page 3 of 11

(x) Change in the Constitution

Where a registered person is a firm or a company or association of persons, then in the event of any change in the constitution of the firm leading to change in PAN, he shall get himself registered afresh. In other cases of change in constitution of business, where there is no change in PAN, the same shall be intimated to the jurisdictional Central Excise Officer within 30 days of such change by way of amendment to the registration details to be carried out online and this will not result in any change in the registration number.

(xi) De-registration Every registered person, who ceases to carry on the business for which he is registered, shall de-register himself by making an online application. Where there are no dues pending recovery from the assessee, application for deregistration shall be approved within 30 days from the date of filing of online declaration and the assessee shall be informed, accordingly.

(xii) Cancellation of registration:

A registration certificate granted under rule 9 may be cancelled after giving a reasonable opportunity to the assessee to represent his case against the proposed cancellation by the Deputy or Assistant Commissioner of Central Excise, in any of the following situations, namely:—

(a) where on verification, the premises proposed to be registered is found to be non-existent;

(b) where the assessee does not respond to request for rectification of error noticed during the verification of the premises within 15 days of intimation;

(c) where there is substantial mis-declaration in the application form; and(d) where the factory has closed and there are no dues pending against the

assessee.

centRaL excise (RemoVaL of Goods at concessionaL Rate of duty foR man-ufactuRe of excisabLe Goods) RuLes, 2001 W.e.f 1-3-2015Rule 3 of Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 required a manufacturer who intended to receive excisable goods for specified use at concessional rate of duty to make an application in quadruplicate and execute a general bond with surety or security.With effect from 01.03.2015, rule 3 has been amended vide Notification No. 9/2015 CE (NT) dated 01.03.2015 to provide that it would be sufficient if the manufacturer furnishes a letter of undertaking. However, such a relaxation would be available only to that manufacturer against whom no show cause notice has been issued under section 11A(4) or 11A(5) of Central Excise Act, 1944 or no action is proposed under any notification issued in pursuance of rule 12CCC of Central Excise Rules, 2002 or rule 12AAA of CENVAT Credit Rules, 2004.

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cenVat cRedit RuLesec and shec can be used foR payment of excise duty W.e.f 30-4-2015Notification No. 12/2015 CE (NT) dated 30.04.2015 has inserted third, fourth and fifth provisos in rule 3(7)(b) to give effect to this amendment.

Earlier AfterEC can be utilised only for payment of EC Manufacturers allowed to utilize credit of EC and

SHEC for payment of excise duty. (Conditional)SHEC can be utilised only for payment of SHEC

However, pursuant to the exemption granted to EC and SHEC leviable on all excisable goods (with effect from 01.03.2015), a manufacturer has been allowed to utilise the following credits of EC and SHEC for the payment of basic excise duty:

Conditons

(i) credit of EC and SHEC paid on inputs or capital goods received in the factory of manufacture of final product on/after the 1-3-2015.

(ii) credit of balance 50% EC and SHEC paid on capital goods received in the factory of manufacture of final product in the financial year 2014-15.

(iii) credit of EC and SHEC paid on input services received by the manufacturer of final product on or after the 1-3-2015

cenVat cRedit aLLoWed on inputs and capitaL Goods ReceiVed diRectLy in the pRemises of the job WoRKeR [RuLes 4(1) and 4(2)(a)]

Earlier Rule 4(1) allowed instant CENVAT credit on receipt of inputs into the factory of the manufac-turer or in the premises of the output service provider or on the delivery of inputs to the output service provider. Likewise, rule 4(2)(a) allowed CENVAT credit on capital goods on receipt of the same in the factory or in the premises of the output service provider or outside the factory for generation of electricity for captive use within the factory or on the delivery of capital goods to the output service provider. Further, when goods were directly sent to job-worker’s premises without bringing them in the manufacturer/output service provider’s premises, CENVAT credit could be taken only when such goods were received back from the job-worker’s premises in the premises of manufacturer/output service provider.

W.e.f. 1-3-2015

Rule 4(1) and rule 4(2)(a) have been amended to allow CENVAT credit in respect of inputs and capital goods immediately on receipt of the same in the premises of job worker where the same are sent directly to the job worker on the direction of the manufacturer or the provider of output service, as the case may be.

time Limit foR aVaiLinG cRedit on inputs and input seRVices. [RuLes 4(1) and 4(7)]

Earlier w.e.f 1-9-2014 now w.e.f 1-3-2015The manufacturer and the provider of output service shall not take CENVAT credit after 6 months of the date of issue of any of the documents specified in rule 9(1).

The manufacturer and the provider of output service shall not take CENVAT credit after 1 year of the date of issue of any of the documents specified in rule 9(1).

Page 5 of 11

inputs / capitaL Goods ReceiVed by manufactuReR and then RemoVed undeR chaLLan foR job WoRK [RuLe 4(5)(a)] W.e.f. 1-3-2015

inputs capitaL GoodsHowever if the inputs are not received back within 180 days, the manufacturer shall pay an amount equivalent to the CENVAT credit attributable to the inputs by debiting the CENVAT credit or otherwise.

However if the capital goods are not received back within 2 years, the manufacturer shall pay an amount equivalent to the CENVAT credit attributable to the capi-tal goods by debiting the CENVAT credit or otherwise.

Further, the credit will be allowed even if any inputs or capital goods are directly sent to a job worker without their being first brought to the premises of the manufacturer/ output service provider and in such a case, the period of 180 days or 2 years, as the case may be, will be counted from the date of receipt of such goods by the job worker.

pRoVisions ReLatinG to aVaiLment of cenVat cRedit undeR paRtiaL and fuLL ReVeRse chaRGe bRouGht at paR [RuLe 4(7)]

a. In case of full reverse charge

Invoice is received and where service tax is paid on full reverse charge basis the Cenvat credit in respect of such input service shall be allowed on or after the day on which payment is made of service tax only. [w.e.f. 11-7-2014]

b. In case of partial reverse charge

Invoice is received and CENVAT credit in respect of such input service shall be allowed on or after the day on which payment is made of both the value of input service and the service tax only. [w.e.f. 1-4-2014]In respect of service tax charged on service receiver CCR is available at the time of payment of service tax.

RecoVeRy of cenVat cRedit taKen but not utiLized and deteRmininG the manneR of utiLization of cRedit [RuLe 14] W.e.f 1-3-2015Rule 14, which prescribes the provisions for recovery of CENVAT credit wrongly taken or erroneously re-funded, has been substituted by a new rule to provide for recovery of CENVAT credit taken but NOT utilized. Further, the manner of determining utilization of credit has also now been provided in the rule itself.

Earlier w.e.f 1-3-2015CCR wrongly taken or erroneously refunded CCR credit taken but not utilised

CENVAT credit has been taken and utilised wrongly or has been erroneously refunded

(a) Where CENVAT credit has been taken wrongly but not utilised, the same will be recovered from the manufacturer/ output service provider in accordance with the provisions of section 11A of the Central Excise Act, 1944/ section 73 of the Finance Act, 1994.

(b) Where CENVAT credit has been taken and utilised wrongly or has been erroneously refunded, the same will be recovered along with interest from the manufacturer/ output service provider in ac-cordance with the provisions of sections 11A and 11AA (interest @ 18% for excise duty) of Central Excise Act, 1944/ sections 73 and 75 (graded interest ranging from 18% to 30% for service tax) of the Finance Act, 1994.

(c) For this purpose, all credits taken during a month will be deemed to have been taken on the last day of the month and the utilisation thereof will be deemed to have occurred in the following manner, namely: -

(i) the opening balance of the month has been utilised first;(ii) credit admissible in terms of these rules taken during the month has been utilised next;(iii) credit inadmissible in terms of these rules taken during the month has been utilized thereafter.

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Interest for wrong utilisation is understandable, but can there be liability of interest only because assessee has ‘taken’ i.e. made entry in Cenvat credit records, without actually utilising it ? In UOI v. Ind-Swift (2011), assessee had taken credit on the basis of fake invoices and admitted that he had availed Cenvat credit wrongly. On basis of the admission, Settlement Commission had ordered payment of in-terest @ 10%. Based on these facts, it has been held that interest is payable even if Cenvat credit is only availed even if not actually utilized [reversing decision in Ind-Swift Laboratories’ v. UOI (2009) 240 ELT 328 (P&H HC DB)]. Thus, this decision has to be seen in light of facts of the case as the assessee had ‘wrongly’ taken Cenvat credit. Since the issue was before Settlement Commission, it can be argued that though the amount is termed as ‘inter-est’, it is in nature of penalty as it is not compensatory in nature. This decision has been brought to notice of revenue officers and tread vide MF(DR) circular.

penaLty pRoVisions undeR RuLe 15 W.e.f 14-5-2015

Earlier, wrongful availment/utilization of CENVAT credit on inputs or capital goods was liable to a penalty

not exceeding the duty on excisable goods in respect of which any contravention has been committed or ₹ 2,000, whichever is greater.

not exceeding 10% of the duty on such goods or ₹ 5,000, whichever is higher

Wrongful availment / utiliza-tion of CENVAT credit on input services was liable to a penalty

which might extend up to ₹ 2,000. not exceeding 10% of service tax on such services

Wrongful availment/utilization of CENVAT credit by reason of fraud etc. with the intent to evade payment of excise duty and service tax was liable to penalty

in terms of erstwhile section 11AC of the Central Excise Act, 1944 and erstwhile section 78 of the Finance Act, 1994 re-spectively.

in terms of erstwhile section 11AC of the Central Excise Act, 1944 and erstwhile sec-tion 78 of the Finance Act, 1994 respectively.

Interest for mere ‘taking’ Cenvat credit without utilization ?

Page 7 of 11

customs act 1962Rate of cVd

old Rate upto 28-2-2015 new Rate w.e.f 1-3-201512% (No cessess since exempted) 12.5% (No cesses since not levied)

Rate of custom dutyThere is no change in Education Cess leviable on imported goods under section 91 read with section 94 of the Finance Act, 2004 as a duty of customs and Secondary & Higher Education Cess leviable on imported goods under section 136 read with 139 of the Finance Act, 2007 as a duty of customs. These cesses will continue to be levied on imported goods.

Page 8 of 11

common chapteRspenaLty

Non Fraud cases1. Excise : Penalty upto 10% of duty or ₹ 5,000 whichever is greater.2. Service Tax : Maximum 10% of service tax.

Return filed Enquiry and investigation

Show cause cum demand

notice30 days Demand Order 30 days

Duty and interest paid

during enquiry and investigation


within 30 days

Duty + interest + Penalty paid during within

30 daysExcise No Penalty No Penalty 25% of penalty

Service Tax No Penalty No Penalty 25% of penalty

Fraud cases1. Excise : 100% of duty.2. Service Tax : 100% of duty.

Return filed Enquiry and investigation

Show cause cum demand

notice30 days Demand Order 30 days


during enquiry and investigation


30 days


30 daysExcise 15% of duty

demanded15% of duty demanded

25% of duty demanded

Service Tax 15% of duty demanded



penaLty pRoVisions undeR section 11acTwo categories:

(i) Penalty provisions where duty has been short/non levied or short/non paid or erroneously refunded for reasons other than fraud etc.

(ii) Penalty provisions where duty has been short/non levied or short/non paid or erroneously refunded by reason of fraud, collusion etc.

(A) Duty has been short/non levied or short/non paid or erroneously refunded for reasons other than fraud etc.

(i) Where any excise duty has been short/non levied or short/non paid or erroneously refunded, for any reason other than the reason of fraud/collusion/wilful mis-statement/ suppression of facts/contraven-tion of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under section 11A(10) will also be liable to pay a penalty not exceeding 10% of the duty so determined or ₹ 5,000, whichever is higher.

(ii) However, if such duty along with interest payable under section 11AA is paid either before the issue of show cause notice or within 30 days of issue of show cause notice (but before adjudication order), no penalty shall be payable by the person liable to pay duty or the person who has paid the duty and all proceedings in respect of said duty and interest will be deemed to be concluded.

Page 9 of 11

(iii) However, if the duty and interest is not so paid and the matter is adjudicated and a order determining duty is passed under section 11A(10), the penalty would be reduced to 25% of the penalty imposed if the following amounts are paid within 30 days of the date of communication of the order of the Central Excise Officer who has determined such duty.

(B) Duty has been short/non levied or short/non paid or erroneously refunded by reason of fraud, collusion etc.

(i) Where any excise duty has been short/non levied or short/non paid or erroneously refunded, by rea-son of fraud/collusion/wilful mis-statement/ suppression of facts/contravention of any of the provi-sions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under section 11A(10) will also be liable to pay a penalty equal to the duty so determined

(ii) Transitionary provisions : In respect of cases where the details relating to such transactions are re-corded in the specified records for the period between 08.04.2011 and 14.05.2015 (date on which the Finance Bill, 2015 received the assent of the President [both days inclusive]), the penalty will be 50% of the duty so determined [Proviso to sub-section (1)(c)]. As per Explanation 2, ‘specified records’ means records maintained by the person chargeable with the duty in accordance with any law for the time being in force and includes computerized records.

(iii) However, if the duty in points [B(i) and B(ii)] and the applicable interest is paid within 30 days of the communication of show cause notice, the amount of penalty liable to be paid by such person will be reduced to 15% of the duty demanded, subject to the condition that such reduced penalty is also paid within the period so specified. Further, all proceedings in respect of the said duty, interest and penalty will be deemed to be concluded.

(iv) However, if the duty in points [B(i) and B(ii)] and the applicable interest is not so paid and the mat-ter is adjudicated and a order determining duty is passed under section 11A(10), the penalty would be reduced to 25% of the duty so determined if the following amounts are paid within 30 days of the date of communication of the order of the Central Excise Officer who has determined such duty:

(C) If the duty amount gets modified in any appellate proceeding, then the penalty amount mentioned in [B)(i)] and [B(ii)] above and interest shall also stand modified accordingly. Where the duty amount or penalty is increased in the appellate proceedings, the benefit of reduced penalty as specified in [A(iii)] and [B(iv)] above will be admissible if duty, interest and reduced penalty in relation to such increased amount of duty is paid within 30 days of the date of such appellate order [Subsections (2) and (3)].

(D) Cases where no show cause notice has been issued prior to 14.05.2015 will be governed by amended provisions of section 11AC [Explanation 1(i)].

(E) Proceedings in the pending show cause notices can be closed – (i) on payment of duty, interest and penalty @ 15% of the duty in fraud cases and (ii) on payment of duty and interest in cases not involv-ing fraud etc., within 30 days of 14.05.2015.

(F) In all cases where show cause notices are adjudicated after 14.05.2015, reduced penalty @ 25% of the duty in fraud cases and 25% of the penalty imposed in cases not involving fraud etc. can be paid within 30 days of communication of the adjudication order if the duty, interest and penalty is paid within such time.

adVance RuLinGBenefit of advance ruling extended to resident firms [Section 23A(c)(iii)] w.e.f 1-3-2015Earlier, public sector companies, resident public limited companies and resident private limited companies were notified under section 23A(c)(iii) of Central Excise Act, 1944 as the class or category of resident persons who can apply for advance ruling in case of specified matters relating to central excise duty.Notification No. 11/2015 CE (NT) dated 01.03.2015 has expanded the scope of advance ruling by additionally notifying resident firm as class or category of residents who can apply for advance ruling in case of specified matters relating to excise duty. Thus, now a resident firm will also be eligible to make an application for advance ruling in excise duty.

Page 10 of 11

Meanings

(a) firm shall have the meaning assigned to it in section 4 of the Indian Partnership Act, 1932 and includes-(i) the limited liability partnership as defined in section 2(1)(n) of the Limited Liability Partnership

Act, 2008; or(ii) limited liability partnership which has no company as its partner; or(iii) the sole proprietorship; or(iv) one Person Company.

(b)(i) sole proprietorship means an individual who engages himself in an activity as defined in section

23A(a) of the Central Excise Act, 1944.(ii) One Person Company means as defined in section 2(62) of the Companies Act, 2013.

(c) resident shall have the meaning assigned to it in section 2(42) of the Income-tax Act, 1961 in so far as it applies to a resident firm.

Parallel amendment has been made in advance ruling provisions under customs law vide Notification No. 27/2015 Cus (NT) dated 01.03.2015.

settLement commissionSection 31(c) of the Central Excise Act, 1944 defines a “case” in respect of which an application for settlement can be made before the Settlement Commission. The definition states that a case means any proceeding under the Central Excise Act or any other Act for the levy, assessment and collection of excise duty, pending before an adjudicating authority on the date on which an application under section 32E(1) is made. However, the proviso to clause (c) of section 31 laid down that when any proceeding is referred back in any ap-peal or revision, as the case may be, by any court, Appellate Tribunal or any other authority, to the adjudicating authority for a fresh adjudication or decision, as the case may be, then such proceeding shall not be deemed to be a proceeding pending within the meaning of this clause.The said proviso to sub-section (c) of section 31 has been amended vide the Finance Act, 2015 so as to provide that when any proceeding is referred back, whether in appeal or revision or otherwise, by any court, Appellate Tribunal Authority or any other authority to the adjudicating authority for a fresh adjudication or decision, then such case shall not be entitled for settlement. This has been done by deleting the reference to the words “in any appeal or revision, as the case may be” in the proviso. Parallel amendment has been in Service tax and customs also.

Page 11 of 11

service tax

amendment

made by

finance act 2015

Page 1 of 11

cHanGe in service tax rate W.e.f. 1-6-2015The Service Tax rate is being increased from 12% plus Education Cesses to 14%. The ‘Education Cess’ and ‘Secondary and Higher Education Cess’ shall be subsumed in the revised rate of Service Tax. Thus, effective increase in Service Tax rate will be from existing rate of 12.36% (inclusive of cesses) to 14%.

Old rate upto 31-5-2015 new rate w.e.f 1-6-201512% + 3% = 12.36% 14% (No education cess is added)

sWacHH bHarat cess (nOt aPPLicabLe yet)An enabling provision is being made to empower the Central Government to impose a Swachh Bharat Cess on all or any of the taxable services at a rate of 2% of the value of such taxable services with the objective of financing and promoting Swachh Bharat initiatives.This Cess shall be levied from a date to be notified by the Central Government in this regard and will not have immediate effect. No date notified yet.

definitiOn Of service U/s 65b(44) W.e.f. 14-5-2015“Explanation 2. – For the purposes of this clause, the expression “transaction in money or actionable claim” shall not include––

(i) any activity relating to use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.

(ii) any activity carried out, for a consideration, in relation to, or for facilitation of, a transaction in money or actionable claim, including the activity carried out––(a) by a lottery distributor or selling agent in relation to promotion, marketing, organising, selling of

lottery or facilitating in organising lottery of any kind, in any other manner;(b) by a foreman of chit fund for conducting or organising a chit in any manner.

analysisThus, it has been made clear that what is excluded from the definition of service is only a transaction in money or actionable claim (like lottery) and not any activity in relation to, or for facilitation of a transaction in money or actionable claim.An Explanation has been also inserted in section 66D(i) which covers betting, gambling or lottery under negative list of services. The Explanation clarifies that the expression ‘betting, gambling or lottery’ shall not include the activity specified in Explanation 2 to section 65B(44). Thus, by virtue of the said amendments, the activity carried out by a lottery distributor or selling agent in rela-tion to promotion, marketing, organizing, selling of lottery or facilitating in organizing lottery of any kind, in any other manner shall be out of the ambit of ‘transaction in money or actionable claim’ as well as the negative list of services.

----------------------x---------------------x---------------------------

Page 2 of 11

neGative List

cLaUse a : nOt yet nOtified

before amendment after amendmentSupport services provided by Govt. to business entity is taxable.

Any services provided by Govt. to business entity is taxable.

Therefore all services provided by the Govt. or local authority to a business entity, except the services that are specifically exempted or covered under any other entry of Negative list. However there are doubts that sov-ereign functions of the Govt. may also come under service tax net on account of said amendment. Therefore suitable clarification is necessary.Insertion of definition of Govt. w.e.f 14-5-2015 (to avoid interpretational issues)

“Government means the Departments of the Central Government, a State Government and its Departments and a Union territory and its Departments, but shall not include any entity, whether created by a statute or otherwise, the accounts of which are not required to be kept in accordance with article 150 of the Constitu-tion or the rules made thereunder”.

cLaUse f : PrOcess amOUntinG tO manUfactUre W.e.f 1-6-2015

Before AfterServices by way of carrying out any process amounting to manufacture or production of goods.

Services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption.

Process amounting to manufacture as defined u/s 65B(40) w.e.f 1-6-2015

Before AfterIt means a process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 or

It means a process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 or the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 or

any process amounting to manufacture of alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under any state act for the time being in force. Also process amounting to manufacture under the Medicinal & Toilet Preparations (Excise Duties) Act, 1955.

any process amounting to manufacture of opium, Indian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under any State Act for the time being in force.

Mega exemption withdrawn w.e.f 1-6-2015

There was exemption pertaining to intermediate production of alcoholic liquor for human consumption. This exemption has been withdrawn.

cLaUse j : admissiOn tO entertainment event Or access tO amUsement faciLity W.e.f 1-6-2015

Admission to entertainment events or access to amusement facility is been omitted from negative list consequently these services now becomes taxable.Amusement facility

It means a place of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks, theme parks or such other places.

Page 3 of 11

Entertainment events

It is an event or a performance w h i c h i s i n t e n d e d t o p r o v i d e r e c r e a t i o n , pastime, fun or enjoyment,

100% exemption :

Exhibition of cinematographic films, circus, recognised sporting events (no tax on cricket tickets), dance performances, theatrical performances (Mandi house) including drama and ballets.conditional exemption :

Concerts (musical program), non-recognised sporting events, fairs (Diwali mela), pageants (Miss Universe Contest), award functions (Film fare award), musical performances (Akon), including cultural programs or any such event or programme.Service Tax to be levied if the amount charged is more than ₹ 500 for right to admission to such an event.

----------------------x---------------------x---------------------------

Page 4 of 11

sectiOn 66f(1). PrinciPLes tO interPret tHe sPecified descriPtiOns Of services W.e.f 14-5-2015Section 66F(1) prescribes that unless otherwise specified, reference to a service (main service) shall not include reference to any input service used for providing such service (main service). The following illustration has been incorporated in this section to exemplify the scope of this provision:“The services by the Reserve Bank of India, being the main service within the meaning section 66D(b), does not include any agency service provided or agreed to be provided by any bank to the Reserve Bank of India. Such agency service, being input service, used by the Reserve Bank of India for providing the main service, for which the consideration by way of fee or commission or any other amount is received by the agent bank, does not get excluded from the levy of service tax by virtue of inclusion of the main service in clause (b) of the negative list in section 66D and hence, such service is leviable to service tax.”

sectiOn 67. vaLUatiOn Of taxabLe service W.e.f 14-5-2015Explanation (a) to section 67 reads as under:Consideration includes–

(i) any amount that is payable for the taxable services provided or to be provided;(ii) any reimbursable expenditure or cost incurred by the

service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed.

This was in Rule 5. But now shifted in the Act to win the many cases pending in the Court. Few courts have held that Rule 5 is ultra vires the Act. S 94(2) has empowered the CG to make rules of valuation also.

(iii) • any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, (E.g. Collected ₹ 2 Lakh and paid back ₹ 1.9 Lakh. ₹ 10,000 is subjected to service tax)• the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket. (E.g. Face value of lottery ticket ₹ 100. Sold to lottery agent for ₹ 90. Difference of ₹ 10 shall be subjected to service tax)

Page 5 of 11

meGa exemPtiOn

HeaLtH care services [entry nO 2]a. Health care services by a clinical establishment, an authorised medical practitioner or para-medics.b. Services provided by way of transportation of a patient in an ambulance, other than those specified in (i)

above. w.e.f 1-4-2015.’

OUtPUt services by artists in fOLK Or cLassicaL fOrm [entry nO 16]Services by a performing artist in folk or classical art forms of (i) music, or (ii) dance, or (iii) theatre where amount charged is upto ₹ 1,00,000. w.e.f 1-4-2015.However services provided by such artist as a brand ambassador is taxable without any monetary limit.note : Brand ambassador means a person engaged for promotion or marketing of a brand of goods, service, property or actionable claim, event or endorsement of name, including a trade name, logo or house mark of any person.

GeneraL exemPtiOn Of transPOrtatiOn Of sPecified GOOds by raiL Or vesseL Or GOOds transPOrt aGency [entry nO 20]

before afterfoodstuff (Sauces, juices, rice, dahi etc) including flours, tea, coffee, jaggery, sugar, milk products, milk, salt and edible oil, excluding alcoholic beverages; or

Milk, salt and food grain including flours, pulses and rice w.e.f 1-4-2015.

services Of GeneraL insUrance bUsiness [entry nO 26]Services of general insurance business provided under following schemes -

(p) Pradhan Mantri Suraksha Bima Yojna w.e.f. 30-4-2015.

Life insUrance service [entry nO 26a]Services of life insurance business provided under following schemes -

(d) Varishtha Pension Bima Yojna w.e.f 1-4-2015(e) Pradhan Mantri Jeevan jyoti Bima Yojna w.e.f 30-4-2015(f) Pradhan Mantri Jan Dhan Yojna w.e.f 30-4-2015

cOLLectiOn Of cOntribUtiOn Under ataL PensiOn yOjna [entry nO 26b]Collection of contribution under Atal Pension Yojna is exempt from service tax w.e.f 30-4-2015

aGent services [entry nO 29]Services by the following persons in respective capacities -(c) mutual fund agent to a mutual fund or asset management company. Deleted w.e.f. 1-4-2015(d) distributor to a mutual fund or asset management company. Deleted w.e.f. 1-4-2015(e) selling or marketing agent of lottery tickets to a distributor or a selling agent; (Sub broker) Deleted w.e.f.

1-4-2015

jOb WOrK [entry nO 30](c) any goods on which appropriate duty is payable by the principal manufacturer excluding intermediate

production process of alcoholic liquor for human consumption on job work; or (w.e.f 1-6-2015)

Page 6 of 11

teLePHOne service [entry nO 32] deLeted W.e.f. 1-4-2015Services by way of making telephone calls from -(a) departmentally run public telephone.(b) guaranteed public telephone operating only for local calls; or(c) free telephone at airport and hospital where no bills are being issued.

OtHer exemPtiOn

entry no 43

Services by operator of Common Effluent Treatment Plant by way of treatment of effluent. w.e.f. 1-4-2015.

entry no 44

Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of fruits and vegetables which do not change or alter the essential characteristics of the said fruits or vegetables. w.e.f. 1-4-2015.

entry no 45

Services provided by way of admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve have been exempted. w.e.f. 1-4-2015

entry no 46

Service provided by way of exhibition of movie by an exhibitor (E.g. PVR Cinemas) to the distributor (Yash Raj Films) or an association of persons consisting of the exhibitor as one of its members has been exempted. w.e.f. 1-4-2015.

entry no 47

Services by way of right to admission to (w.e.f. 1-6-2015)(i) Exhibition of cinematographic film, circus, dance, or theatrical performance including

drama or ballet.(ii) Recognized sporting event.(iii) Award function, concert, pageant, musical performance or any sporting event other than

a recognised sporting event, where the consideration for admission is not more than ₹ 500 per person.

note : Access to amusement park is subjected to service tax.

Page 7 of 11

abatement

transportation of passengers or goods by w.e.f 1-4-2015Rail (passengers / goods) GTA by Road (goods) Vessel from one port in India to another (Goods)

30% of gross billing is subject to service tax

4.2%


4.2%


4.2%1 2 3

transportation of passengers by air w.e.f 1-4-2015Economy class Business class

40% of gross billing is subject to service tax5.6%

60% of gross billing is subject to service tax 8.4%

4 4

renting ofTransport of passengers with or without

accompanied belonging by a contract carriage (Bus) other than motor cab and radio taxi

Motor cab and radio taxi designed to carry passengers.



5 6

tour OperatorPackage Tour (Transportation, accommodation, city tour etc)

Arranging or booking solely accommodation in relation to tour

Other cases (Only transportation)


3.5%


1.4%


5.6%7 8 9

OthersServices in relation to chit. Renting of hotels, inns, guest houses, clubs,

campsites or other commercial places meant for residential or lodging purposes.

Financial leasing including hire purchase

Abatement deleted w.e.f.

1-4-2015



1.4%10 11

Page 8 of 11

reverse cHarGe

9. service PrOvided by a mUtUaL fUnd aGent W.e.f. 1-4-2015

Mutual fund agent / distributor --> Mutual Fund Mutual Fund the service receiver shall pay service tax

10. service PrOvided by a LOttery aGent W.e.f. 1-4-2015

Lottery agent / Marketing agent --> Lottery distributor Lottery distributor the service receiver shall pay service tax

11. any service PrOvided by a GOvt tO bUsiness entity (nOt yet nOtified)

Govt --> Business entity Business entity the service receiver shall pay service tax

12. any service PrOvided by a PersOn tO aGGreGatOr (W.e.f 1-3-2015)

Any person --> Aggregator Aggregator the service receiver shall pay service tax if aggregator have the physical presence in taxable territory. If it does not have physical presence in taxable territory any person representing the aggregator is liable to pay service tax. If the aggregator neither has a physical presence nor does it have a representative in the taxable territory then it would appoint a person in the taxable territory for the purpose of paying service tax.

R u l e 2 ( 1 ) ( a a ) ] Meaning of Aggregator

“Aggregator means a person, who owns and manages a web based software application, and by means of the application and a communication device, enables a potential customer to connect with persons providing service of a particular kind under the brand name or trade name of the aggregator”

R u l e 2 ( 1 ) ( b c a ) . Brand name or trade

It means a brand name or a trade name whether registered or not, that is to say, a name or a mark, such as an –

invented word or writing, or a symbol, monogram, logo, label, signature,

which is used for the purpose of indicating, or so as to indicate a connection, in the course of trade, between a service and some person using the name or mark with or without any indication of the identity of that person”

13. sUPPLy Of manPOWer + secUrity service W.e.f 1-4-2015

service provided or agreed by way of service Provider service receiverSupply of manpower for any purpose or security service. NA 100% of ST

note 1 : Rule 2(1)(fa). Security service means services relating to the security of any property, whether movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity.note 2 : Rule 2(1)(g). Supply of manpower means supply of manpower, temporarily or otherwise, to another person to work under his superintendence or control. It means manpower should work under supervision of service receiver.Placement agencies and supplier of labour both covered here.

Page 9 of 11

reGistratiOn certificate1. Applicants seeking registration for single premises shall file an online application for registration on ACES

website in form st-1. [aces : automation Of central excise and service tax]2. Following details are to be mandatorily furnished in the application form: (a) Permanent Account Number

(PAN) of the proprietor or the legal entity being registered (except Government Departments) (b) E-mail and mobile number

3. Registration would be granted online within 2 days of filing the complete application form. On grant of registration, the applicant would be enabled to electronically pay service tax.

4. Registration Certificate downloaded from the ACES website would be accepted as proof of registration and there would be no need for a signed copy. Registration form ST 2

5. stc code i.e. registration number : Registration number also known as Service Tax Code (STC) is a 15 digit PAN based number. 1st 10 digits of this number are the same as the PAN of such person. Next 2 digits are ST. Next 3 digits are serial numbers indicating the number of registration taken by the service taxpayer against a common PAN.

cbec has prescribed following documents is to be submitted within 7 days of online application.

1 Copy of the PAN Card of the proprietor or the legal entity registered.2 Photograph and proof of identity of the person filling the application3 Document to establish possession of the premises to be registered such as proof of ownership,

lease or rent agreement, allotment letter from Government, No Objection Certificate from the legal owner.

4 Details of the main Bank Account5 Memorandum/Articles of Association/List of Directors6 Authorisation by the Board of Directors/Partners/Proprietor for the person filing the application7 Business transaction numbers obtained from other Government departments or agencies such as

Customs Registration No. (BIN No), Import Export Code (IEC) number, State Sales Tax Number (VAT), Central Sales Tax Number, Company Index Number (CIN) which have been issued prior to the filing of the service tax registration application

revOcatiOn Of reGistratiOn certificate

The registration certificate may be revoked by the Deputy/Assistant Commissioner in any of the following situations, after giving the assessee an opportunity to represent against the proposed revocation and taking into consideration the reply received, if any:

1 The premises are found to be non existent or not in possession of the assessee.2 No documents are received within 15 days of the date of filing the registration application.3 The documents are found to be incomplete or incorrect in any respect.

Page 10 of 11

cOmPOsitiOn scHeme Old Rate New Rate

air travel agent

Domestic booking 0.6 % 0.7 % International booking 1.2 % 1.4 %

Life insurance

First year premium 3 % 3.5 % Subsequent year premium 1.5 % 1.75 %

money changing service

Amount of currency exchanged upto ₹ 1 Lakh

0.12 % subject to minimum of ₹ 30

0.14 % subject to minimum of ₹ 35

Amount of currency exchanged exceeding ₹ 1 Lakh and upto ₹ 10 Lakhs

₹ 120 and 0.06 % ₹ 140 and 0.07 %

Amount of currency exchanged exceeding ₹ 10 Lakhs

₹ 660 and 0.012 % subject to maximum of ₹ 6,000

₹ 770 and 0.014 % subject to maximum of ₹ 7,000

Lottery agent

Where guaranteed prize payout is more than 80 % ₹ 7,000 ₹ 8,200

Where guaranteed prize payout is less than 80 % ₹ 11,000 ₹ 12,800

Page 11 of 11